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An   American 
Transportation  System 

A  Criticism  of  the  Past  and  the  Present 
and  a  Plan  for  the  Future 


By 

George  A.  Rankin 


G.  P.  Putnam's  Sons 

New     York     and     London 

Ob"   "Knickerbocker,    press 

1909 


Copyright,  1909 

BY 

GEORGE  A.  RANKIN 


Tibe  ImicRerbocber  prees,  ftcw  fiorh 


3*5 


PREFACE 

THE  views  to  be  found  in  this  book  are  chiefly 
the  result  of  the  writer's  investigation  of  the 
requisites  of  an  American  transportation  system. 
The  conclusions  reached  may  be  summarily  stated 
as  follows: 

i.  The  material  prosperity  of  this  country 
demands  a  transportation  system  which  shall 
be  safe,  at  all  times  adequate,  and  possessed  of 
the  capacity  to  grow  with  industrial  develop- 
ment; which  shall  be  economical;  and  which  shall 
serve  all  persons  and  all  places  with  impartiality. 

2.  The  sustenance  of  such  a  transportation 
system  requires  a  fair  return  to  the  capital  hon- 
estly invested  in  it,  and  the  American  people  will 
willingly  pay  rates  which  will  yield  a  fair  return 
when  they  know  the  amount  of  the  capital  hon- 
estly invested. 

3.  The  securities  of  such  a  system  should  be 
as  sound  and  stable  as  it  is  possible  to  make  them, 
to  the  end  that  one-sixth  of  the  wealth  of  this 
country  may  not  be  buffetted  about  either  by 
idle  rumors  or  the  machinations  of  wrongdoers, 
and  the  control  of  the  system  should  be  such 
that  the  trustees,  who  manage  it  alike  for  its 

iii 


158550 


iv  Preface 

owners  and  the  public,  will  be  incapable  of  manip- 
ulating it,  or  its  capital,  for  their  unlawful  indi- 
vidual enrichment. 

4.  The  system  should  not  itself  be  engaged  in 
politics,  nor  should  it  be  usable  for  political  pur- 
poses, and,  therefore,  any  scheme  which  has  for 
its  purpose  the  adjustment  of  the  antagonism 
between  the  people  and  the  transportation  cor- 
porations should  be  one  which  eliminates  them 
from  American  politics,  state  and  national,  as 
present  or  potential  factors. 

Such  being  the  requirements,  the  problem 
dealt  with  is,  how  may  they  be  realized.  As 
to  this,  it  is  argued,  that  the  facilities  of  trans- 
portation cannot  operate  with  the  highest  degree 
of  safety,  efficiency,  economy  and  fairness  as 
disjointed,  competitive  and  non-cooperating  parts, 
but  that  the  desired  ends  can  be  attained  only  by 
a  transportation  system,  the  members  whereof 
operate  as  an  harmoniously  working  whole. 
And,  it  is  contended,  such  a  system  is  impossible 
of  realization  so  long  as  our  railways  are  subject 
to  the  conflicting  regulations  of  one  congress 
and  forty-five  state  legislatures.  This  condition, 
it  is  contended,  is  at  once  a  governmental  and  a 
transportation  absurdity. 

How  to  be  rid  of  this  absurd  situation,  is  the 
question.  It  is  not  obvious  how  it  may  be  accom- 
plished except  by  an  amendment  to  the  federal 
constitution  whereby  the  states  surrender  their 


Preface  v 

semblance  of  jurisdiction  over  intrastate  trans- 
portation. 

To  suggest  this  is  to  confront  us  with  two  great 
fears — railway  monopoly  and  the  centralization 
of  power  in  the  general  government.  Here  the 
attempt  has  been  made  to  show  that  we  have 
now  all  the  ills  of  federal  control  with  none  of  the 
advantages  which  might  be  expected  from  it. 
The  states  have  lost  their  authority,  but  the 
federal  government  has  not  acquired  it.  Author- 
ity everywhere  is  suspended  by  the  veto  power  of 
the  federal  courts.  The  plan  proposed  in  this 
book  is  to  make  the  federal  government  respon- 
sible affirmatively  in  place  of  the  mere  power 
to  negative  state  action,  which  it  now  possesses. 

As  to  the  fear  of  monopoly,  it  is  candidly  ad- 
mitted that  transportation  is,  and  must  be,  a 
monopoly ;  but  the  proposal  is  to  make  it  a  legal 
monopoly,  not  an  outlaw.  It  is,  indeed,  proposed 
to  consolidate  all  our  important  transportation  fa- 
cilities in  one  corporation,  but  to  exactly  define  the 
powers,  duties  and  obligations  of  such  corporation 
in  the  organic  act  creating  it,  limiting  its  capi- 
talization to  the  actual  cost  of  facilities  produced, 
and  making  certain  its  compensation  for  services 
required,  thus,  to  the  greatest  degree  possible, 
rendering  its  securities  stable,  which  it  is  hoped 
would  obviate  many  of  the  evils  now  attendant 
upon  stock  exchange  operations. 

Finally,  it  is  proposed  to  replace  our  present 


vi  Preface 

multitudinous  railway  commissions  by  a  court, 
possessed  of  judicial  authority  to  inquire  whether 
our  transportation  corporation  is  conducting  it- 
self in  accordance  with  the  law  of  its  creation, 
to  which  court  the  trustee-managers  shall  make 
reports  concerning  the  execution  of  their  trust, 
as  other  trustees  do  to  courts  of  equity. 

G.  A.  R. 

New  York,  February  15th,  1909. 


CONTENTS 

PAGE 

Introduction       .         .         .         .         .         .  i 

Summary   of    drift    of   thought    concerning 

transportation         .....  i 

Part  I 

The  Wrong  in  our  Transportation  System  9 

Is  our  Railway  System  Safe?       ...  9 

An  apology  for  railway  accidents           .          .  9 

Demanded  degree  of  railway  safety       .          .  10 

Degree  of  railway  safety  afforded           .          .  11 

Is  our  Railway  System  Adequate?       .         .  14 

Authoritative    statement    of    inadequacy    of 

equipment       .          .          .          .          .          •  14 

Estimated  inadequacy  thirty-three  per  cent.  .  1 5 

Lack  of  expedition  in  freight  service        .          .  16 

What  an  adequate  transportation  system  means  1 9 

Is  our  Railway  System  Economical?    .          .  22 

Misleading   conceptions   of   railway    economy  22 

Various  aspects  of  railway  economy     .          .  24 
vii 


viii  Contents 


PAGE 


Usual  and  narrow  view  of  railway  economy   .        26 

Waste  from  lack  of  safety   .  .  .  .28 

Waste    from    inadequate    transportation 
facilities  ......       30 

Waste  from  indirect  freight  carriage     .  .       31 

Railway    excuses    for    waste    from    indirect 
carriage 33 

Financial  waste  from  duplication  of  railways       34 

Economic  waste  from  railways  killing  water 
transportation  .  .  .  .  .37 

Dishonest     Railway     Capitalization     and 

Economic  Waste    .....       39 

Popular  misconceptions  concerning  corpora- 
tions and  railway  ownership       ...        40 

Ownership  of  railway  securities     ...        44 

Railway  ownership  and  railway  control        .         46 

The  railway  debt  a  charge  on  the  nation  .         47 

Economic  waste  in  acquisition    of    railway 
system  .  .  .         .         .  .  51 

Increase  of  Railway  Facilities  and  Rail- 
way Debt  .  .  .      .  .  .52 

Fundamental  principles       .  .  .  .52 

The  exact  question  involved         .  .  .53 

The  measure  or  unit  of  railway  facilities     .       54 


Contents  ix 

PAGE 

The  measure  or  unit  of  railway  "cost"  .       56 

Summary  of  results  of  calculations        .  .       66 

Why  railway  mileage  has  increased  in  cost       .       73 

Increase  in  railway  debt  not  represented  by 
increase  in  railway  facilities      .  .  .76 

Securities  made  by  resolution  and  printer's  ink       84 

Financing  dummy  companies       ...       88 

Economic  Waste  from  Dishonesty  of  Se- 
curities        ......       93 

Inherent  dishonesty  in  the  multiplied  diver- 
sity of  railway  securities  ...       96 

Wide  variation  in  value  of  different  securities 
of  same  companies  .  .  .  .98 

Primary  cause  of  dishonesty  of  railway  secur- 
ities       .......      103 

The  Instability  of  Railway  Securities  .     106 

Is  our  Railway  System  an  Impartial  Servant 

of  all  Persons  and  all  Places?     .  .     114 

Are  the  Charges  of  our  Railway  System 

Reasonable?  .  .         .         .         .118 

Does  our  Railway  System  Receive  a  Fair 
Return  and  only  a  Fair  Return  on  its 
Honest  Investment?      .  .  .  .124 

Table  showing  railway  capital  receiving  no 
return    .  .         .         .         .  .         .127 


x  Contents 

Is  our  Railway  System's  Management  such 
as  to  Prevent  it  Being  Used  as  a  Means 
of  Illegal  Gain? 

The  theory  of  a  corporation 

The  corporation  in  practice 

How  managerial  control  is  perpetuated 

The  immensity  of  railway  transactions 

In  the  way  of  justice 

Is  our  Railway  System  Free  from  a  Corrupt 
ing  Influence  upon  American  Life? 

Why  our  Railway  System  Is  as  it  Is    . 


131 
131 
132 

i34 

i39 
142 

i45 
i47 


Part  II 

Legislative  Attempts  to  Correct  Wrongs  in 

our  Transportation  System  .         .154 

Legislation  Concerning  Safety  .         .         .154 

The  principles  of  railway  accident  law   .  .154 

Kinds,  classes  and  groups  of  railway  accidents     158 

Source    of    information    concerning    railway 
accidents         ......     162 

Is  there  a  natural  law  of  railway  accidents?      .     164 

Causes  of  railway  accidents  from  the  railway 
standpoint      .  .  .  .  .     168 

Accidents  caused  by  coupling  or  uncoupling 
cars        .  .  .  .  .  .  .     172 


Contents  xi 

PAGE 

Accidents  caused  by  falling  from  locomotives 
or  cars  when  in  motion      .  .  .  175 

Injuries  to  passengers  caused  by  falling  from 
cars      .  .  .         .         .         .         .185 

Accidents  at  highway  crossings    .  .  188 

Accidents  from  being  struck  by  locomotives 
and  cars  at  places  other  than  highway  cross- 


ings 


190 


Accidents  caused  by  collisions      .  .  .194 

The  causes  of  collisions        .         .         .  -195 

Accidents  caused  by  derailments  .  .204 

Other  causes  of  railway  accidents  .  .207 

Accidents  caused  by  overhead  obstructions  .     208 

Accidents  caused  by  jumping  on  or  off  trains, 
etc.,  in  motion         .  .  .  .  .209 

Accidents  caused  by  negligence  and  disobedi- 
ence of  employees    .  .  .  .  .211 

The  deep-down  cause  of  railway  accidents        .     215 

Legislation  Concerning  Railway  Adequacy     218 

Powers  of  congress  to  compel  railway  ade- 
quacy   .  .         .         .         .         .         .220 

Why  congress  has  been  silent       .  .  .221 

Why  our  railway  system  has  fallen  behind  the 
needs  of  the  country  .  .  .  .222 

Legislation  Concerning  Railway  Rates       .     225 


xii  Contents 


PAGE 


The  impressiveness  of  railway  charges    .  225 

Absence  of  definite  legislative  policy  in  rate- 
making  ......     227 

Railway  revenue,  rates  and  classification  of 
services.  ......      230 

The  process  of  rate-making  .  .  .232 

Legislation    Concerning    Railway    Compe- 
tition  .......     233 

An  unco-ordinated  railway  system        .  .     233 

What  is  railway  competition         .  .  .235 

Has  competition  averted  railway  faults?        .     237 

Has    competition    prevented    railway    mon- 
opoly?   .......     243 

The  American  Railway  Financial  Scheme  .     248 

Its  inherent  weakness  .  .  .  .248 

The  demands  on  our  railway  system     .  .255 

A  Man  I  Met — An  Interlude        .         .  .259 

Part  III 

A  Suggested  Constitutional  Amendment      .     270 

Various  aspects  of  the  constitution  of   the 
United  States  .         .  .  .  .270 

The  constitutional  equilibrium  destroyed  by 
the  Fourteenth  Amendment     .  .  .276 


Contents  xiii 

PAGB 

The  Fourteenth  Amendment  a  mere  negation     279 

The  weak  spot  in  our  scheme  of  government     280 

Conflict    of    laws    under    our    governmental 
scheme  .......     282 

What  the  fathers  would  have  thought  of  our 
railway  problem      .  .  .  .  .295 

A    Suggested    Constitutional    Amendment 

(Continued)  ......     303 

Proposed  and  Ideal  Transportation  Systems 

Compared       .         .         .         .         .         .     309 

Is  the  Proposal  Practical?  .         .         .316 

I.  Can  our  Railways  be  Fairly  and  Justly 

Appraised?    .  .         .         .         .         .316 

Who  shall  appraise  them?   .  .         .  .316 

The  inventory  and  appraisal  of  railways  .     320 

The  valuation  of  railways  by  each  other  .     321 

The  " cost  of  road "  accounts        .  .  .322 

The  franchise  value  of  railways    .  .  .326 

II.  Marshaling    Railway    Assets    and    Se- 

curities        ......     333 

Redistribution  of  securities  .  .  •     334 

III.  The  Transportation  Corporation  .     340 
How  the  corporation  should  be  created       .     340 


xiv  Contents 

PAGE 

IV.  The   Business   of  the   Transportation 
Corporation  .         .         .         .         .345 

Dissevering   transportation    from    other    in- 
dustries ......     345 

Unification  of  rail  and  water  transportation     347 

V.  The  Board  of  Directors  .  .  .357 
Ownership  representation  .  .  -357 
The  duties  of  directors  .  .  .  .361 
Would  individual  incentive  be  destroyed?  364 
The  proposed  plan  and  government  ownership     368 

VI.  What  Percentage  on  Investment  would 

be  Reasonable?     .....     372 

Why  capital  invested  in  transportation  should 
have  a  fixed  return  .         .         .         .372 

The  Stock  Exchange  and  values  .         .         .378 

What   authority   should   determine   railway 
income?  ......     380 

What  the  rate  per  cent,  of  income  should  be  .     382 

Redeemability  of  proposed  securities      .         .389 

VII.  The  Revenue  to  Support  the   System     391 

What  the  support  of  a  railway  means     .         .'     391 

How  the  aggregate  requirements   would   be 
ascertained     .         .         .         .         .         •     394 

VIII.  Railway  Rates  and  Distances    .  .     399 


Contents  xv 


PAGE 


Railway  rates  and  public  policy     .  .  •     399 

How  far  may  a  railway  haul  freight?    .  .402 

Relative  distance-charges    .          .  .  .407 

What    principle     should     govern  distance- 
charges?          .          .          .          .  .  .411 

How  uniform  rates  would  work      .  .  .417 

IX.  Classification  of  Traffic      .  .  .422 

X.  The    Transportation    System    and    the 

Court    ...  .  .  .  .  431 

The  government  and  the  transportation 
system  .  .  .  .  .  .  .431 

XI.  Taxation    of    Transportation     under 
Suggested  Plan     .....     437 

XII.  Would  the  Proposed  Scheme  Centralize 
Power  in  the  Federal  Government?     .     441 

Decentralization  of  irresponsible  federal 

power    .......     441 

Governmental  vs.  corporate  centralization    .     445 

Index 451 


An  American  Transportation 
System 


INTRODUCTION 

Summary  of  the  drift  of  thought  concerning  trans- 
portation 

There  are  certain  conclusions  concerning  trans- 
portation which  will  probably  be  disputed  by 
no  one.  Thus  it  is  often  said  a  nation  is  an 
organism,  not  unlike  a  living  individual,  where- 
in the  channels  of  transportation  are  arteries 
and  veins;  if  the  flow  in  these  be  sluggish,  in- 
dustrial disorders  are  indicated,  if  it  be  clogged, 
industrial  diseases  follow,  if  it  be  stopped,  national 
disaster  results. 

To  no  country  is  the  highest  order  of  transpor- 
tation more  vital  than  to  the  United  States. 
From  a  political  standpoint  this  is  so  because 
of  the  huge  distances  which  separate  the  political 
units  which  compose  the  nation,  and  because  of 
the  long  frontiers  and  coast  lines  which  must  be 
defended.     What  matters  it  that  we  can  raise 


2    An  American  Transportation  System 

great  armies,  if  we  cannot  get  them  quickly  where 
they  are  needed  ?  From  an  industrial  standpoint 
the  necessity  for  excellent  transportation  is  great 
in  this  country,  because  the  United  States  affords 
the  widest  domain  on  this  earth  wherein  there  exists 
absolutely  free  and  unrestricted  trade.  Of  what  use 
is  this  precious  privilege,  unless  we  have  the  means 
whereby  it  may  be  exercised  ?  The  United  States 
is  self-supporting  as  no  other  country  is,  yet  its 
very  vastness  of  territory,  its  consequent  industrial 
heterogeneity  and  the  interdependence  of  its 
industries  but  serve  to  exaggerate  the  demand 
for  the  most  superior  transportation  facilities. 
In  the  absence  of  transportation  as  we  have  it  to- 
day, but  little  heavy  freight  could  be  carried  on 
land  more  than  twenty  miles  without  eating  its 
value  up  in  carriage  charges.  If  our  railway 
system  were  blotted  out,  our  cities  would  become 
depopulated,  our  surplus  crops  rot  in  their  fields, 
our  mineral  wealth  lie  unexplored  and  our  fac- 
tories idle.  Therefore  it  is  that  the  material 
well-being  of  this  country  depends  so  largely 
upon  its  system  for  the  transportation  of  its 
people  and  the  products  of  their  labor  and  intel- 
ligence. Therefore  it  is  that  to  keep  the  channels 
of  transportation  unclogged  and  unstopped  is  a 
charge  upon  the  nation.  And  therefore,  also, 
it  is  that  the  system  of  transportation  must  be 
sustained.  He  who  cannot  perceive  these  neces- 
sities is  blind  to  facts  and  devoid  of  imagination. 


Introduction  3 

Certain  facts  are  obvious.  Something  long 
has  been,  is,  and  apparently  will  continue  to  be 
wrong,  in  the  relations  between  the  people  and 
those  who  are  engaged  in  the  transportation 
business — something  so  wrong  as  at  times  to 
border  on  open  hostilities.  Drastic  remedies 
spasmodically  applied — boomerang  laws  to  force 
competition  and  prevent  combination,  commis- 
sions overloaded  with  inefficiency,  ill-considered 
and  misapplied  rate  laws — have  not  reached,  but 
have  rather  more  deeply  rooted  the  essential 
wrong. 

From  the  records  we  may  learn  that  the  capi- 
tal invested  in  transportation  is  about  one-sixth 
of  all  the  wealth  of  this  country  and  that  about 
one-twelfth  of  all  our  people  depend  for  their  live- 
lihood on  the  wages  paid  by  transportation  cor- 
porations. It  also  appears  that  practically  all 
the  railways  in  the  United  States  have  consoli- 
dated into  a  few  systems,  which  systems  are  them- 
selves united  by  community  of  interest,  and  that 
the  human  heads  of  these  systems  hold  at  their 
mercy  and  control  some  seventeen  thousand  mil- 
lion dollars  of  the  people's  savings. 

It  is  alleged  that  our  transportation  system, 
as  a  whole,  is  grossly  over-capitalized;  that 
for  many  of  the  securities,  which  represent  the 
value  of  the  system,  no  money  was  ever  paid  into 
its  treasury  and  that  over-capitalization  serves 
as  the  excuse   for  exorbitant  rates.  |  Fictitious 


4    An  American  Transportation  System 

securities,  it  is  said,  are  still  being  issued  and  will 
continue  to  be. 

These  fictitious  securities,  once  issued,  pass 
into  the  hands  of  innocent  holders  and  thus  be- 
come a  charge  upon  the  country,  the  repudia- 
tion of  which  becomes  a  national  dishonor,  and, 
therefore,  the  country  must  labor  to  make  these 
fictions  realities.  Furthermore  it  is  claimed  that 
spurious  securities  are  the  main  instrumentalities 
of  the  stock  manipulator,  and  that  thus  the  stock 
exchange  becomes  the  slaughter-house  of  the 
people's  savings.  I  but  record  these  allegations 
not  asserting  their  truth. 

Some  facts  are  but  slightly  appreciated ;  among 
these,  how  great  has  been  the  people's  contribu- 
tion to  the  building  of  our  railway  system.  Ul- 
timately they  have  always  provided  the  money 
that  bought  the  bonds  which  built  the  roads. 
Nor  is  it  realized  how  extensive  their  present  in- 
vestment in  railway  securities  is;  how  little  part 
they  have  in  the  management  of  the  property  in 
which  their  savings  are  invested ;  how  tremendous 
have  been  their  losses  from  its  mismanagement; 
how  disgracefully  wasteful  to  the  country  the 
financing  of  our  railway  system  has  been,  is,  and 
will  continue  to  be,  while  present  methods  remain 
the  custom. 

Long  ago  the  conclusions  were  reached  that 
transportation  corporations  are  not  merely  pri- 
vate affairs;  that  they  exist  for  and  owe  their 


Introduction  5 

first  duty  to  the  public;  that  they  owe  an  equal 
duty  to  all  the  public ;  that  the  state  has  the  right 
to  compel  them  to  serve  the  public  justly;  that 
directors  and  executives  of  corporations  are,  in 
the  highest  degree,  trustees  for  stockholders;  that 
it  is  unlawful  for  them  to  use  their  positions  of 
trust  for  their  own  profit,  and  that  the  stock  of  a 
corporation  can  only  be  lawfully  issued  for  value 
received  by  the  corporation.  These  are  old  and 
full  grown  ideas,  yet  they  have  not  borne  much 
fruit. 

Some  ideas  have  been  born  and  are  apt  to 
grow.  Many  people  now  believe  that  traffic 
preferences  shown  to  certain  places,  or  localities, 
are  as  abhorent  to  our  system  of  government, 
and  as  iniquitous  in  their  results,  as  traffic  priv- 
ileges shown  to  individuals  in  the  various  forms 
of  rebates.  It  has  been  stated  by  respectable 
authority  that  the  profit-making  burden  of  the 
entire  transportation  system  is  thrown  upon  the 
parts  of  the  country  least  able  to  bear  it,  that  is, 
non-competitive  and  non-junction  points.  Some 
may  be  found  who  claim  that  all  forms  of  special 
preferences  to  persons  and  places,  owe  their  ori- 
gin to  destructive  competition  between  railways, 
or  between  railway  and  water  transportation, 
that  inland  water  transportation  has  been  killed 
by  destructive  railway  competition,  and  that  the 
attempt  to  eliminate  destructive  competition  is 
the  cause  of  railway  consolidations.      There  are 


6    An  American  Transportation  System 

others  who  think  that  railway  consolidations, 
as  carried  on  by  the  natural  processes  of  merger, 
absorption,  purchase  and  the  like,  are  accom- 
panied by  gross  abuses  and  the  imposition  of  in- 
tolerable burdens  on  the  country,  and  that  the 
process  of  consolidation  must  be  controlled.  It 
is  not  difficult  to  comprehend  that  the  increase 
in  transportation  facilities,  invested  capital  and 
number  of  employees  will  be,  at  least,  in  direct  pro- 
portion to  the  increase  in  population  and  will  prob- 
ably exceed  it.  It  is  reasonable  to  expect  that 
in  twenty-five  years  more  there  will  be  invested 
in  railways  in  the  United  States,  from  forty  to 
fifty  billions  of  dollars,  with  voting  employees 
of  four  to  five  millions.  There  is  a  growing  de- 
mand that  the  complete  organization  resulting 
from  railway  consolidations  and  railway  growth 
be  eliminated  as  a  political  factor,  or  the  country 
will  be  in  danger  of  its  undue  influence.  On  the 
other  hand  it  is  asserted  that  the  unification 
of  all  transportation  facilities  into  a  transportation 
system  is  necessary  to  perfect  economy  and 
efficiency. 

Some  facts  are  poorly  remembered;  among 
these,  the  theory  of  our  government — that  all 
sovereignty  is  vested  in  the  people.  Therefore 
the  people  cannot  suffer  from  any  wrongs  which 
legislation  can  correct,  if  they  have  the  will  to 
right  them.  The  same  power  which  made  the 
constitution   can   unmake   or   amend   it.      It  is 


Introduction  7 

solely  by  the  will  of  the  people  that  private 
ownership  in  property  exists.  The  tendency 
toward  government  ownership  of  transportation 
is  world  wide,  and  will  infect  this  country  to  its 
everlasting  damnation  as  a  free  republic,  if  means 
be  not  taken  to  obviate  its  necessity  or  propriety. 
These  are  facts  but  poorly  remembered  by  the 
people,  and,  apparently,  totally  forgotten  by  ag- 
gregated wealth. 

Finally,  some  facts,  in  justice  to  all,  would 
better  be  recognized.  A  man  is  not  necessarily 
a  thief  because  he  is  engaged  in  the  transportation 
business,  or  necessarily  honest  because  he  is  a 
politician,  or  necessarily  wise  because  he  occupies 
a  high  position,  or  believes  he  should  do  so. 
The  better  way  to  judge  ideas  is  by  their  merit, 
not  their  source.  The  American  people  are,  as 
a  whole,  not  unjust.  The  existence  of  a  question 
assumes  that  there  are  at  least  two  sides  to  it. 
Likewise  it  should  not  be  forgotten  that  certain 
conflicting  facts  clash  in  the  mind  and  lead  equally 
honest  men  to  opposite,  and,  to  them,  equally 
logical  conclusions.  Social  life  is  a  compromise 
between  extremes,  and  the  best  method  which 
human  ingenuity  has  yet  invented  to  settle  a 
disputed  issue  is  an  impartial  judicial  tribunal, 
whose  judgments  the  bad  only  fear.  That  which 
is  ancient  is  likely  to  be  wise,  but  if  only  it  were 
wise,  we  should  worship  stocks  and  stones.  How- 
ever valuable  a  constitution  may  be,  one  which 


8    An  American  Transportation  System 

lags  behind  a  country's  development  needs  ad- 
vancement. Lastly  it  may  be  suggested,  that 
continuous  agitation  of  a  nervous  patient  is 
more  detrimental  than  a  surgical  operation. 

With  this  resume'  of  conclusions,  allegations 
and  ideas  (grown  and  growing)  concerning  trans- 
portation and  allied  subjects,  gathered  from  the 
press,  of  all  colors,  from  magazines,  from  public 
speakers,  in  and  out  of  legislatures,  employed  and 
unemployed,  from  reports,  governmental  and 
other,  and  from  the  works  of  learned  writers, 
with  an  occasional  notion  of  the  author,  let  us 
proceed  at  once  to  the  examination  of  the  follow- 
ing questions  directly  related  to  our  existing 
transportation  system: 

Does  it  afford  the  measure  of  safety  which  it 
should  ? 

Is  it  at  all  times  adequate  ? 

Is  it  economical  alike  to  investors  and  to  the 
country? 

Is  its  capitalization  honest? 

Does  it  serve  all  persons  and  all  places  on  uni- 
form terms  ? 

Does  it  receive  a  fair  return,  and  only  a  fair 
return,  on  its  honest  investment? 

Is  its  management  and  control  such  as  to  pre- 
vent its  use  as  a  means  of  illegal  gain  ? 

Is  it  free  from  the  accusation  of  a  corrupting 
influence  on  American  political  life? 


PART  I 

THE  WRONG  IN  OUR  TRANSPORTATION 
SYSTEM 

Is  Our  Railway  System  Safe  ? 

An  apology  for  railway  accidents 

Living  is  itself  a  dangerous  occupation. 
Moving  about  adds  to  the  danger  of  mere 
living,  and  whirling  through  space  at  thirty,  fifty, 
seventy,  ninety  miles  an  hour,  in  ponderous  ma- 
chines, whose  suddenly  blocked  energy  smashes  to 
smithereens  themselves  and  their  obstructions — 
this  raises  danger  to  the  limit.  He  who  seeks 
absolute  immunity  from  accidents,  had  best  sit 
out  his  time  under  his  own  fig  tree.  If  he  would 
become  a  moving  particle  in  this  over-energized 
world,  let  him  expect  nothing  less  than  to  be 
bumped.  Steam,  which  moves  the  train,  is  a 
dangerous  element;  the  train  is  a  composite  of 
many  parts,  wherein  one  out  of  harmony  may 
wreck  the  whole;  hidden  defects  in  wheels,  axles, 
rails  will  escape  the  most  practiced,  not  to  say 
scientific,  eye;  mortal  men  who  use,  and  put  them- 
selves in  the  way  of  being  hurt  by,  these  instru- 

9 


io  An  American  Transportation  System 

ments  of  destruction,  are  not  overscrupulous  in 
the  care  of  themselves;  and,  finally,  the  physical 
operations  of  railroads  are  guided  and  governed 
by  mere  men,  with  senses  too  often  overstrained 
for  clear  perception  and  dulled  to  danger  by  too 
constantly  facing  it.  Seeing  all  this,  the  marvel 
is,  not  that  railway  accidents  happen,  but  that 
there  are  not  more,  and  more  fatal,  accidents. 
I  say  this  much  in  favor  of  the  iron  horse,  the 
load  he  pulls  and  his  drivers,  because  with  all 
good  things  which  relate  to  transportation,  I  am 
in  hearty  sympathy.  To  say  anything  ill  of  it 
is  to  hurt  myself. 

Demanded  degree  of  railway  safety 

What,  then,  is  the  just  requirement  of  the  rail- 
way so  far  as  safety  is  concerned  ?  Surely  it  is  not 
that  total  immunity  from  accidents  should  be  abso- 
lutely guaranteed ;  for  that  is  more  than  can  be  re- 
quired of  mortal  agencies  and  foresight.  But  this 
we  may  demand:  that  the  operation  of  the  rail- 
way shall  be  made  as  safe  as  human  knowledge, 
ingenuity,  care  and  money  can  make  it.  Mark 
you,  I  do  not  say  "as  safe  as  ordinary  knowledge, 
ordinary  ingenuity,  ordinary  care  and  the  rea- 
sonable expenditure  of  money  can  make  it"; 
ordinary  care  and  reasonable  expenditure  will 
not  suffice  in  railway  operation,  the  highest  care 
and  the  necessary  expenditure  should  be  the  rule. 


Wrong  in  Our  Transportation  System  1 1 

The  best  obtainable  is  what  we  may  demand. 
For  instance,  the  difference  of  five  dollars  a  ton 
should  not  stand  between  a  rail  that  is  safer  and 
one  that  is  not  so  safe. 

Degree  of  railway  safety  afforded 

Now,  for  the  present,  we  ask  you  of  the  rail- 
way: "Have  you  given  us  the  highest  degree  of 
safety  obtainable  ? "  Let  us  not  quibble  over  little 
things,  but  have  recourse  only  to  the  broadest 
facts.  If  you  say  you  have  given  us  this  highest 
order  of  safety,  then  how  shall  you  answer  these 
questions?  "Is  the  earth  of  America  less  fitted 
to  build  railroads  on  than  the  earth  of  Europe? 
Do  our  forests  grow  timber  that  is  not  as  sound  as 
Europe's?  Do  not  our  forges  turn  out  as  good 
steel  as  those  of  England?  Are  our  engineers 
less  capable?"  Of  course  you  will  answer: 
"  Our  earth  is  as  stable,  our  timbers  as  sound,  our 
steel  as  good  and  our  engineers  as  capable." 
' ' '  Then  why  do  our  railways  kill  and  maim  ten 
men  to  one  that  is  killed  and  maimed  by  those 
of  Europe?  '\ 

"  Does  it  not  make  you  ashamed  that  we,  who 
boast  of  all  greatness,  must  each  year  stare  at  this 
pitiful  record, — 108,324  persons  injured  by  our 
railroads  in  1906,  of  whom  10,618  were  killed? 
Whence  will  you  recruit  your  skilled  trainmen 
when  you  kill  2000  and  injure  30,000  each  year? 


12  An  American  Transportation  System 

One  killed  for  every  133  employed!  One  injured 
for  every  nine  employed!  Really,  is  this  war  or 
railroading?  What  army  do  you  know  of  that 
keeps  one  in  nine  of  its  soldiers  in  the  hospital?" 
I  know  what  you  will  say.  You  will  say:  "It 
will  take  money,  billions  of  money,  to  make  our 
railways  as  safe  as  they  should  and  could  be  made. 
Give  us  the  money  and  let  us  charge  rates  which 
will  yield  a  fair  return,  and  Americans  will  give 
to  America  a  transportation  system  that  will 
make  all  the  world  marvel  at  its  safety."  If 
this  be  true,  and  it  is,  then  why  do  you  not  stop 
employing  illegitimate  arguments  with  law-makers, 
and  turn  to  their  education? 

And  you  who  have  the  immediate  charge  of 
countless  millions  of  human  lives — yes  and  of  your 
own  lives,  too, — what  shall  you  say  ?  Are  the  rail- 
way operatives  of  Europe  better  than  those  of 
America  ?  I  know  you  will  scout  the  idea.  You  will 
say,  and  none  will  disagree  with  you,  that  in  in- 
telligence, ingenuity,  initiative  and  endurance,  you 
are  the  superiors  of  any  trainmen  in  the  world. 
Yes,  but  does  your  superiority  extend  to  the  prime 
qualities  of  obedience  and  discipline?  Are  you 
not  too  confident  of  yourselves,  too  wilful,  too 
apt  to  say,  "this  rule  was  made  to  be  broken," 
too  loyal  to  your  comrades  to  protect  even  your 
own  lives,  rather  than  expose  their  negligence  or 
disobedience?  But  I  see  I  am  forgetting.  In 
this  part  I  had  intended  only  to  be  a  complainer. 


Wrong  in  Our  Transportation  System  13 

However,  in  the  matter  of  the  killing  of  human 
beings  by  railroads,  there  is  one  important  fact 
which  those  who  seek  for  mere  bloody  sensation 
deliberately  suppress,  and  in  justice  it  should  be 
mentioned.  'Of  the  ten  thousand  odd  who  were 
killed  in  1906,  about  one-half  were  trespassing 
on  railroad  property.  For  obvious  reasons,  not 
many  were  merely  injured  in  this  occupation. 
Now,  I  confess  a  lack  of  sympathy  for  those  who 
seek  the  road-bed  of  a  railway  as  a  sleeping,  prom- 
enading or  loitering  place.  Generally  speaking, 
their  deaths  were  about  due  anyway.  The  pity 
of  it  is  that  the  iron  horse  should  be  charged  with 
their  execution.  These  aside,  however,  it  cannot 
be  denied  that  in  this  country  there  is  a 'veritable 
slaughter  of  trainmen  and  other  employees,,  of 
passengers  and  of  others  rightly  upon  railroad 
property,  and  a  destruction  of  freight  which  is 
appalling.  The  comparison  with  European  rail- 
ways, in  this  regard,  is  perfectly  legitimate,  and, 
I  may  add,  it  is  about  the  only  legitimate  com- 
parison which  can  be  made  between  the  European 
and  the  American  railway  systems.  If  you  take 
100  as  absolute  safety,  then  our  railways  afford 
us  but  10%  of  possible  safety  against  90%  for 
Europe. 

It  is  not  in  the  nature  of  the  American  to 
rest  satisfied  with  what  is  inferior.  Foremost  in 
everything  which  relates  to  mechanical  appliances, 
we  are  behind  all  in  safety.)  Our  railway  equip- 


14  An  American  Transportation  System 

merit  is  to  that  of  Europe  as  a  carriage  to  a 
lumber  wagon.  In  fact  we  have  taught  them  all 
they  know,  or,  apparently,  are  capable  of  learning 
about  the  comfort  of  travel.  Only  in  safety  are 
we  so  inferior.  To  attempt  to  ascertain  why 
this  is  so  is  one  of  the  purposes  of  this  book.  Let 
us  not  boast  that  we  are  killed  in  comfort. 

Is  Our  Railway  System  Adequate? 
Authoritative  statement  of  inadequacy  of  equipment 

This  is  written  in  December,  1908.  This  other- 
wise unimportant  fact  is  mentioned  because, 
to  raise  the  question  of  the  adequacy  of  our  rail- 
way system  at  this  time,  seems  to  smack  of  irony. 
With  from  300,000  to  500,000  freight  cars  standing 
idle  during  the  past  twelve  months,  the  system 
would  seem  to  be  rather  overloaded  with  ade- 
quacy. But  how  short  are  our  memories!  We 
should  not  forget  that  during  the  two  years 
preceding  the  panic  of  1907,  our  railway  freight 
system  literally  broke  down  under  the  enormous 
loads  of  freight  offered  it.  Or,  if  you  wish  your 
memories  refreshed,  turn  to  pages  16,  17,  18,  of 
the  Report  of  the  Interstate  Commerce  Commission 
for  1906,  wherein  you  will  find  it  stated  as  a 
fact  by  the  highest  authority,  that  "A  car  famine 
prevails  which  brings  distress  in  almost  every 
section  and  in  some  localities  amounts  to  a  calam- 


Wrong  in  Our  Transportation  System  1 5 

ity."  Likewise,  that  in  the  Northwest  farmers 
could  not  ship  their  grain;  that  in  the  Southwest 
and  trans-Missouri  region,  "tens  of  thousands  of 
live  animals  are  denied  movement  to  the  consum- 
ing markets, "  "  while  throughout  the  Middle  West 
and  Atlantic  seaboard  the  shortage  of  cars  for 
manufactured  articles  and  miscellaneous  merchan- 
dise has  become  a  matter  of  serious  concern." 
Do  you  think  that  because  we  have  had  a  panic, 
the  growth  and  development  of  this  country  have 
reached  their  end?  True,  the  panic  entailed 
enormous  losses,  but  this  at  least  we  can  say: 
It  did  not  rob  our  fields  of  one  jot  of  their  fertility 
nor  take  a  pound  of  mineral  from  the  earth.  It 
temporarily  curtailed  our  consuming  capacity, 
but  did  not  touch  our  capacity  for  production. 
With  the  return  of  the  former  the  latter  will 
return,  and  the  conditions  of  1905-6-7  will  again 
be  with  us. 

Estimated  inadequacy  thirty-three  per  cent 

But  I  am  afraid  to  rely  upon  my  own  deductions 
concerning  the  adequacy  of  our  railway  system. 
Therefore  I  again  turn  to  "authority."  Before 
an  audience  of  three  thousand  people,  specially 
interested  in  all  that  relates  to  transportation, 
I  heard  one,  who  is,  perhaps,  the  foremost — 
certainly  the  most  respected — railroad  man  in 
this  country,  solemnly  allege,  that  our  railway 


1 6  An  American  Transportation  System 

system  has  to-day  but  two-thirds  the  capacity 
required  of  it  by  the  needs  of  the  country;  and 
recently  I  read  that  another  great  railway  presi- 
dent had  said  the  railroads  require  six  billion 
dollars  expenditure  to  meet  required  develop- 
ments. These  statements  are  singularly  in  har- 
mony, for  whether  we  view  the  matter  from  the 
standpoint  of  capital  to  be  invested,  or  of  facilities 
to  be  increased,  each  requires  about  one-third 
more  than  is  at  present  employed. 

Lack  of  expedition  in  freight  service 

But  in  the  matter  of  adequacy,  it  is  not  only 
that  the  whole  railway  system  is  thirty-three 
per  cent  behind  the  development  of  the  country. 
Railway  transportation  is  nothing  if  not  expedi- 
tious. Now,  I  am  about  to  make  a  statement 
which  no  man  will  believe,  and  therefore  I  quote 
it.  "A  significant  fact  in  this  connection  is  the 
small  average  mileage  made  by  cars  in  freight 
service,  amounting  to  only  23  miles  a  day. "  "  Mon- 
strous fabricator!"  you  say.  If  this  statement 
be  not  true  take  away  their  offices,  for  it  is  quoted 
verbatim,  minus  the  italics,  from  the  1906  Report 
of  the  Honorable  Commissioners  of  Interstate 
Commerce,  page  16.  It  is  a  fact  that,  on  the 
average,  our  freight  cars  go  rushing  over  the 
country  at  the  reckless  break-neck  speed  of  one 
mile  an  hour.     I  do  not  doubt  it,  for  was  I  not 


Wrong  in  Our  Transportation  System  1 7 

nearly  two  months  in  getting  a  box — weight 
150  lbs. — one  thousand  miles?  And  did  I  not 
go  to  the  local  freight  office  so  often  that  there 
was  established  an  intimate  friendship  with  the 
agent?  Yes,  and  have  not  I  and  many  an- 
other man  shipped  tons  of  heavy  freight  by  ex- 
press, to  avoid  the  losses  incident  to  slow  freight 
deliveries? 

Twenty-three  twenty-fonr-hundredths  of  a  mile 
per  hour!  Why  a  traction  road  engine  will  make 
three  miles  an  hour.  A  flatboat  will  float  down 
stream  two  miles  an  hour — I  fancy.  A  Nile 
boat  going  up  stream,  with  all  the  crew  asleep, 
would  be  ashamed  to  make  so  little  speed  as  an 
American  freight  car.  Recently  I  was  told  by 
a  manager  of  a  first-class  road,  that  it  takes 
thirty  days  to  get  a  car  load  of  grain  from  Buffalo 
to  New  York!  At  twenty-three  miles  a  day  you 
might,  if  you  did  not  die  of  impatience,  get  freight 
from  New  York  to  San  Francisco  in  one  hundred 
and  forty  days. 

Of  course,  everything  is  not  so  bad  as  it  appears 
from  these  statements.  There  are  fast  freights 
in  the  United  States  —  sixty-hour  trains  from 
New  York  to  Chicago — through  freights  between 
all  important  points.  But  what  occurs  to  me 
is  this:  if  twenty- three  miles  a  day  be  the  average, 
and  if  this  average  includes  the  fast  trains,  then, 
in  the  name  of  sweet  charity,  what  must  be  the 
speed  of  the  really  slow  trains?    Of  course,  no 


1 8  An  American  Transportation  System 

one  will  imagine  that  freight  trains,  when  actually 
moving,  make  less  than  a  mile  an  hour.  That 
would  be  too  ridiculous.  The  main  fact  is,  that, 
either  the  freight  itself  from  the  time  it  is  delivered 
to  the  carrier,  or  the  car,  is  not  in  actual  movement 
toward  its  destination  a  quarter — nay,  often, 
a  tenth — of  the  time. 

Now  what  is  the  matter?  Why  this  farce  of 
freight  transportation,  this  snail's  pace,  this  de- 
veloper of  heart-breaking  and  brain-destroying 
impatience?  Is  it  deliberate  spite  work  on  the 
part  of  railways?  No,  emphatically  no.  The 
truth  is,  they  are  doing  about  as  well  as  they  can 
with  the  facilities  they  have  to  work  with.  'They 
cannot  afford  to  pound  their  light  road-beds  into 
a  pulp,  by  driving,  at  a  high  speed,  the  enormously 
heavy  trains  which  do  the  freight  carrying  of  this 
country;  and  they  cannot  afford  to  pound  the 
life  out  of  their  heavy  equipment,  by  driving  it 
at  high  speed  over  their  light  road-beds  and, 
usually  (considering  the  weight  of  equipment), 
light  rails;  and  they  cannot  afford  to  run  fast, 
and  carry  freight  at  the  ridiculous  average  of 
seven  and  one-half  mills  per  ton  per  mile;  in 
short,  they  cannot  afford  to  give  first-class  freight 
service^ 

But  these  "cannot  affords"  do  not  begin  to 
reach  the  root  of  the  trouble.  The  simple  un- 
qualified truth  is,  that  we  are  a  nation  of  boasters. 
We  boast  of  the  wonderful  number  of  miles  of 


Wrong  in  Our  Transportation  System  19 

railways  we  have — greater  than  all  the  rest  of 
the  world,  I  believe.  I  am  so  tired  hearing  it 
that  I  have  not  the  patience  to  look  it  up.  And 
we  boast  of  the  wonderful  speed  of  our  passenger 
trains.  And  we  boast  of  the  billions  of  tons  of 
freight  carried.  And  we  boast,  and  boast,  and 
boast.  It  is  only  occasionally,  when  we  stop 
to  inquire  into  actual  facts, — when  we  learn  that 
we  kill  ten  times  as  many  people  as  the  roads  of 
other  countries ;  that  freight  congestion  is  at  times 
such  as  to  amount  to  a  calamity ;  that  our  freight 
trains  creep  and  crawl,  instead  of  run — that  we 
must  descend  from  our  boasting  platform  and 
admit  that  our  transportation  system  as  a  whole 
is  miserably  deficient. 

What  an  adequate  transportation  system  means 

Now,  what  is  meant  by  an  "adequate"  trans- 
portation system?  Any  schoolboy  will  tell  you 
that  it  is  a  transportation  system  which  can  at  all 
times  respond  to  the  requirements  of  the  country. 
Nor  is  the  problem  one  of  complexity.  Essen- 
tially it  is  a  question  of  finance:  on  the  part  of 
railways,  the  raising  of  capital  necessary  to  make 
an  adequate  system;  on  the  part  of  the  public, 
the  payment  of  rates  necessary  to  support  an 
adequate  system.  I  was  about  to  add :  allow  the 
rates  and  the  capital  will  be  had  for  the  asking. 
But  let  us  not  be  in  too  great  a  hurry  to  assert 


20  An  American  Transportation  System 

this,  until  we  find  out  how  the  railways  have  used 
the  money  which  has  been  furnished  them  in  the 
past.  In  the  meantime,  it  is  certain  there  are 
'four  directions  in  which  developments  must  be 
made  before  adequacy — and,  incidentally,  greater 
safety — will  be  assured. 

i. — Road-beds  must  be  made  more  secure, 
more  permanent.  There  are  tens  of  thousands 
of  miles  of  American  railways  that  are  either  not 
ballasted  at  all,  or  so  imperfectly  as  not  to  deserve 
the  name.  And  all  bridges  must  be  made  of 
stone  or  steel. 

la. — Trackage  must  be  enormously  increased,^ 
and  wherever  the  business  is  such  as  to  make 
even  a  half-way  decent  excuse  for  doing  so,  the 
roads  must  be  doubled  tracked.     Doubling  the 
trackage  of  a  road  quadruples  its  capacity. 

3  .—Equipment  must  be  sufficient  to  satisfy 
requirements  at  any  and  all  times,  even  though 
this  involves  periods  of  idleness  for  a  large  per- 
centage of  it.  Above  all  things,  transportation 
requires  that  production  be  deliverable  at  the 
opportune  time.  It  may  be  unfortunate  that 
crops  do  not  ripen  all  the  year  around.  But 
in  this,  transportation  must  bow  to  nature. 

4. — But  all  the  road-beds,  trackage  and  equip- 
ment which  money  could  make  and  buy  would 
*be  useless  expenditures,  unless  thes  facilities  for 
handling  freight  in  yards,  and  terminal  facili- 
ties  generally,    be   increased    accordingly.     This 


Wrong  in  Our  Transportation  System  21 

is  where  the  congestion  becomes  unendurable. 
Strange  as  it  seems,  it  has  taken  railroad  men 
half  a  century  to  fully  realize  the  fact  that  a 
railroad  is  no  better  than  its  terminals.  You 
might  as  well  build  a  railroad  to  the  north  pole, 
as  between  Chicago  and  New  York  unless  you 
had  appropriate  terminal  facilities.  And  these 
are  enormously  expensive — so  costly,  in  fact, 
that  it  is  said  one-third  of  the  total  cost  of  a  road 
one  thousand  miles  in  length  would  be  consumed 
in  providing  terminals  at  New  York. 

Stated  briefly,  then,  our  question  is,  whether 
the  American  people  are  willing  to  put  up  with 
an  unsafe,  inferior,  inadequate  transportation 
system,  or  have  the  intelligence  to  pay  for  one 
that  will  supply  their  needs — whether  they  have 
the  sense  to  see  that  the  very  best  investment 
which  a  country  can  make,  is  in  the  best  trans- 
portation system  which  money  can  produce. 
I  say  advisedly,  "  a  country, "  for  there  is  nothing 
truer  than  this:  that  looked  at  from  whatever 
standpoint  its  transportation  system  is  and  ever 
must  remain  a  charge  upon  the  country.  And  now, 
before  asking  the  people  to  lend  this  additional 
six  billions,  and  before  asking  them  to  continue, 
for  all  time,  to  furnish  money  for  the  continuous 
development  of  their  transportation  system; 
let  us  inquire  of  our  railway  promoters,  builders 
and  operators,  what  sort  of  stewards  they  have 
been  of  the  billions  which  have  been  loaned  them 


22  An  American  Transportation  System 

in  the  past — how  they  have  managed  this  greatest 
of  all  estates  and  trusts. 

Is  Our  Railway  System  Economical? 

Misleading  conceptions  of  railway  economy 

Before  considering  whether  our  transportation 
system  is  as  economical  as  it  could  and  should 
be  made,  it  seems  necessary  to  clearly  differen- 
tiate that  problem  from  the  aspect  of  the  railway 
as  an  economic  factor  in  industrial  progress  and 
civilization. 

There  are  certain  utterly  fallacious,  yet  popular 
and  effective,  arguments  constantly  interjected 
into  this  problem,  which  but  serve  to  distract 
us  from  its  proper  consideration,  and  cause  us 
to  resign  ourselves  to  the  persistence  of  known 
wrongs.  For  instance,  we  often  hear  honest 
railway  enthusiasts,  as  well  as  those  who  are  paid 
for  their  words,  compare  present  with  past  means 
of  transportation.  Reclining  in  luxurious  cars, 
crossing  the  continent  in  a  few  days,  with  every 
comfort,  we,  at  the  same  time,  commiserate  our 
ancestors,  congratulate  ourselves  and  forgive  the 
railways  for  any-  and  everything.  Seeing  that 
history  informs  us  that  less  than  a  hundred  years 
ago,  the  necessary  charges  for  hauling  prohibited 
the  carriage  of  heavy  freight  more  than  a  very 
few  miles;  that  in  the  memory  of  those  still 
living,  charges  are  not  a  tenth  what  they  once 


Wrong  in  Our  Transportation  System  23 

were;  that,  upon  the  whole,  rates  are  to-day  less 
than  half  what  they  were  thirty  or  forty  years 
ago ;  that  freight  may  now  be  carried  so  cheaply, 
that  almost  any  production  may  be  transported 
almost  any  distance,  and  find  a  profitable  market; 
seeing  all  these  advantages,  it  is  concluded  that 
our  railway  system  of  to-day  must  be  inherently 
economical. 

All  such  suggestions  are,  of  course,  deluding 
and  misleading.  To  all  these  advantages  we  are 
entitled  as  a  matter  of  right.  They  are  the  results 
of  the  inventive  genius  of  man,  and  for  them  we 
owe  not  one  cent  of  obligation  nor  one  suggestion 
of  gratitude  to  the  men  who  manage  our  trans- 
portation system.  Legally  and  morally  they  are 
trustees,  solemnly  bound  for  the  compensation 
they  receive,  if  not  for  the  great  trust  reposed 
in  them,  to  afford  us  every  advantage  of  travel 
and  traffic  which  their  minds  can  bring  into  being. 
All  the  advantages  we  enjoy  have  come  to  us 
along  with  grossly  uneconomical  methods,  and 
it  is  not  improbable  that  economical  methods 
would  insure  still  greater  advantages. 

Other  fallacious  suggestions  have  found  lodg- 
ment in  the  mind,  and  great  efforts  are  made 
to  keep  them  there  and  make  them  grow;  among 
these,  that  the  errors  of  judgment  and  criminal 
practices  of  the  past  must  be  borne  by  the  present, 
and,  therefore,  that  those  of  the  present  must 
descend  as  heritages  to  future  generations.     Not 


24  An  American  Transportation  System 

only  are  the  people  of  this  present  day,  here,  in 
the  United  States,  entitled  to  have  the  railway 
with  every  facility  which  invention  has  developed, 
but  they  are  likewise  entitled  to  have  it  unin- 
cumbered by  past  mistakes  or  wrongdoing.  Our 
railway  system  must  be  judged  as  it  exists  to-day. 
In  the  past  it  is  supposed  to  have  gotten  its  reward 
as  it  went  along.  If  it  did  not,  it  was  its  own 
fault.  Errors  and  crimes  of  the  past  cannot  be 
added  to  capital  account  for  the  present  and  future 
to  pay  interest  on.  It  is  not  done  in  any  other 
department  of  life's  activities.  The  cost  of  the 
house  that  the  tornado  destroys  is  not  added  to 
the  value  of  the  land.  The  mistakes  of  the  farmer 
in  planting  the  wrong  kind  of  grain  or  trees 
do  not  add  to  the  value  of  the  farm  he  leaves 
his  son.  Bankruptcies  are  past  losses.  Only  in 
our  railway  system  are  mistakes  and  crimes 
capitalized.  Let  us  brush  away  these  delusive 
arguments,  and  proceed  to  consider  the  railway 
upon  its  own  merits. 

Various  aspects  of  railway  economy 

There  are  several  standpoints  from  which 
may  be  viewed  the  problem  of  the  economy  of 
our  transportation  system.  In  one  form  or 
another  it  will  be  found  cropping  up  in  almost 
every  page  of  this  book,  for  it  is  identified  with 
the  entire  transportation  question. 


Wrong  in  Our  Transportation  System  2  5 

The  railway  system  of  a  country  presents  itself 
in  two  important  aspects :  It  is  a  means  of  trans- 
portation— a  physical  operation, — and  it  is  a 
financial  operation.  The  question  of  its  economy 
involves  both  of  these  aspects.  Considered  as 
a  mere  means  of  transportation,  it  may  be  econom- 
ical or  wasteful  alike  to  itself,  to  those  who  use 
it  and  to  those  who  have  their  means  invested 
in  it.  Considered  as  a  financial  operation,  it 
may  be  economical  or  wasteful  to  itself,  to  its 
investors  and  to  the  country  which  supports  it. 
It  may  be  economical  to  those  who  immediately 
use  it  as  a  means  of  transportation,  and  yet 
grossly  wasteful  as  a  financial  operation;  as, 
for  instance,  where  cut-throat  rate-wars  make 
low  rates  to  shippers  and  bring  bankruptcy  to 
railways  and  losses  to  investors.  It  is  possible 
that  it  may  be  economical  as  a  financial  operation, 
and  yet  grossly  uneconomical  as  a  means  of  trans- 
portation; as,  for  instance,  when  rates  are  higher 
than  they  need  to  be.  It  may  be  wasteful  both 
as  a  means  of  transportation  and  as  a  financial 
operation,  which  it  generally  is.  It  may  be 
economical  both  as  a  means  of  transportation 
and  as  a  financial  operation,  which  it  rarely  is. 
And  yet  it  is  only  when  it  fulfills  both  these  con- 
ditions, that  a  railway  system  may  be  said  to  be 
economical  in  the  broadest  and  best  sense. 

Whether  the  system  is  economical  or  wasteful 
may   be   viewed    from   the   standpoints   of    (1), 


26  An  American  Transportation  System 

those  who  manage  it;  (2),  those  who  have  capital 
invested  in  it;  (3) ,  those  who  have  capital  invested 
in  other  means  of  transportation;  (4),  those  who 
use  the  system  or  other  modes  of  transportation ; 
and,  finally,  (5),  from  the  standpoint  of  that 
rather  indefinite  quantity  known  as  the  "public" 
or  the  "country";  which  includes  all  the  people 
who  are  affected  directly  or  indirectly  by  trans- 
portation, either  as  a  means  of  carriage  or  as  a 
financial  operation,  in  their  individual  capacities 
and  as  units  in  organized  society.  Accordingly, 
we  look  for  the  figures  showing  whether  the 
system  is  economical  or  wasteful,  at  the  books 
of  the  system,  the  books  of  the  investors,  the 
books  of  investors  in  other  modes  of  transporta- 
tion, the  books  of  shippers  and  finally  at  the 
books  of  the  public  or  country  at  large. 

Usual  and  narrow  view  of  railway  economy 

I  cannot  regard  it  as  otherwise  than  unfortunate, 
that  those  who  have  given  this  subject  considera- 
tion— the  learned  writers,  the  legislators  and  the 
courts  of  justice — have  had,  or  seem  to  have 
had,  but  two  viewpoints,  that  of  the  managers 
and  that  of  the  shippers;  and,  consequently, 
have  looked  at  but  two  sets  of  books,  the  books 
of  the  system  and  the  books  of  the  shippers. 
They  have  concerned  themselves  almost  wholly 
with  the   cost   of  service  to  the  transportation 


Wrong  in  Our  Transportation  System  27 

company,  and  whether  the  rates  charged  the 
shipper  were  reasonable;  while,  as  a  matter  of 
fact,  under  the  system  which  has  been  in  vogue, 
the  first  of  these  matters  is  comparatively  unim- 
portant, and  the  second  not  possible  to  decide. 
The  cost  of  a  particular  service  to  the  carrier 
has  never  been  the  determining  element  in  fixing 
the  rates  it  has  charged,  and  as  to  whether  rates 
are  in  themselves  reasonable,  we  have  never  had 
either  basis  or  data  for  the  determination  of  that 
question. 

Now,  if  we  are  capable  of  taking  the  viewpoint 
of  the  investors  in  railways,  the  viewpoint  of  the 
investors  in  other  modes  of  transportation  and 
the  viewpoint  of  the  interested  public,  we  will  be 
able  to  see  what  the  cost  of  our  transportation 
system  has  been,  as  that  cost  appears  upon  the 
books  of  the  nation.  When  we  concentrate  our 
mental  vision  upon  the  books  of  the  nation,  and 
look  at  the  cost,  loss  and  waste  which  our  trans- 
portation system  has  entailed,  is  entailing  and 
will  continue  to  entail  upon  the  country  as  a 
whole,  the  mind  is  staggered  at  their  enormity, 
and  the  conclusion  is  irresistible  that  the  system 
has  been,  is,  and  will  continue  to  be,  unless  meth- 
ods are  changed,  so  utterly  uneconomical,  so 
disgracefully  wasteful,  that  its  past  existence  or 
continuance  is  nothing  less  than  an  insult  to  our 
intelligence  as  a  people.  We  have  not  the  data 
to  justify  us  in  saying  what  rates  are  reasonable, 


28  An  American  Transportation  System 

but  we  have,  unfortunately,  the  data  justifying 
this  harsh  criticism. 

For  the  purpose  of  considering  this  problem 
of  the  economy  of  our  transportation  system, 
let  us  divide  the  subject  as  nearly  as  may  be  into 
(i)  economy  of  transportation  as  a  physical 
operation  and  (2)  economy  of  transportation 
as  a  financial  operation,  giving  typical  examples 
of  each. 

Waste  from  lack  of  safety 

Reference  has  been  made  to  the  loss  of  life, 
injuries  to  persons  and  destruction  of  property 
incident  to  the  lack  of  safety  in  the  operations 
of  our  railways.  This  loss  brings  with  it  an 
enormous  financial  loss  in  the  form  of  railway 
property  destroyed  as  well  as  damages  volun- 
tarily paid  by  the  railways,  and  it  makes 
necessary  the  maintenance  of  a  great  claims  and 
legal  staff  and  an  endless  chain  of  litigation^ 
expensive  alike  to  the  companies  and  claimants. 
Apparently  ^no  statistics  are  available  showing 
the  amounts  which  the  railways  pay  every  year 
because  of  accidents  to  persons  and  destruction 
to  property,  nor  are  we  informed  what  are  the 
railway  expenses  for  the  maintenance  of  hospi- 
tals for  their  injured  employees^  So  far  as  I  am 
aware,  we  have  the  data  covering  just  one  item 
of  loss— ^the  actual  value  of  the  railway  property 


Wrong  in  Our  Transportation  System  29 

destroyed  as  the  result  of  collisions.  For  the 
year  1906,  this  item  alone  amounted  to  $10,659,- 
189.  1  Mark  that  this  does  not  include  damages 
paid  by  railways  for  property  of  shippers  de- 
stroyed nor  for  persons  killed  or  injured.  It 
includes  merely  the  destruction  of  equipment 
by  collisions.  If  this  sum  represents  the  loss 
from  one  cause  alone,  the  sum  total  of  losses 
largely  due  to  deficiency  of  safety  must  be 
startling. 

For  the  period  of  eighteen  years— 1 888-1 906 — 
the  total  number  of  persons  killed  by  railways 
was  122,919  and  the  number  injured  827,744^ 
Each  of  these  lives  had  a  financial  value  to  the 
nation,  each  person  injured  imposed  a  financial 
burden  upon  some  one.  One  hundred  thousand 
persons  cannot  be  killed  and  maimed  each  year, 
without  materially  diminishing  the  national  effi- 
ciency.1 But  attention  is  just  now  more  particu- 
larly directed  to  economic  waste  from  a  purely 
transportation  standpoint.  It  may  be  safely  as- 
sumed that  a  billion  dollars  would  not  cover 
the  losses  which  the  railways  have  sustained 
in  the  last  quarter  of  a  century,  directly  due 
to  lack  of  safety  in  their  construction  and 
operation. 

But  let  it  not  be  imagined  that  these  losses 
fell  upon  the  railway  corporations.  Looked  at 
in  a  large  way,  it  will  be  readily  seen  that  these 

'  In  1907  the  number  was  122,855. 


30  An  American  Transportation  System 

were  losses  which  the  people  were  compelled 
to  pay.  For  if  the  losses  had  not  been  sustained, 
perceptibly  lower  rates  could  have  been  charged 
the  public.  Moreover,  if  the  money  paid  for 
the  destruction  of  life  and  property  had  been 
applied  to  increasing  the  safety  of  the  system, 
it  would  have  done  much  in  that  direction.  The 
$10,659,189  which  collisions  alone  cost  the  rail- 
ways in  the  loss  of  their  own  property  in  1906, 
would,  economically  and  honestly  spent,  have 
double  tracked  hundreds  of  miles  of  road. 

Or,  look  at  it  from  another  standpoint.  In 
the  year  1906  the  surplus  earnings  of  the  entire 
railway  system  were  about  $90,000,000.  Thus  it 
will  be  seen  that  nearly  11%  of  what  would  have 
been  surplus  earnings  was  consumed  in  the  loss 
of  railway  property  following  collisions  alone. 
I  have  chosen  collisions  as  typical  of  this  form 
of  railway  waste,  because  there  never  yet  occurred 
a  collision  which  was  not  avoidable. 

Waste  from  inadequate  transportation  facilities 

Let  us  turn  now  to  another  typical  form  of 
railway  waste  resulting  in  loss  to  both  the  system 
and  the  country,  and  which  springs  from  inade- 
quate transportation  facilities.  I  have  heard  it 
alleged  that  the  losses  arising  from  the  inability 
of  the  railways  to  handle  the  country's  production 
in  1905-6-7  would  reach  a  round  billion  dollars. 


Wrong  in  Our  Transportation  System  3 1 

Our  country  is  so  vast  and  these  losses  were  dis- 
tributed so  uniformly,  that  it  is  almost  impossible 
to  conceive  their  enormity.  Directly  or  indirectly 
they  reached  every  one.  Grain  raisers,  cattle 
raisers,  cattle  feeders,  manufacturers,  merchants, 
builders,  laborers,  were  all  affected.  If  to  the 
direct  losses  occasioned  by  inability  to  carry 
freight  at  all,  or  at  the  opportune  time,  there  be 
added  the  ever  recurring  losses  incident  to  delays 
in  delivering  freight  intended  for  specific  purposes 
at  specific  times,  you  have  another  source  of  loss, 
the  aggregate  of  which  is  well-nigh  incalculable. 
Building  is  delayed  waiting  for  structural  mate- 
rial, expensive  mechanics  are  kept  on  hand  at 
loss  to  the  builder  or,  worse  still,  laid  off  at  loss 
to  the  laborer;  but  why  go  through  the  catalogue, 
when  every  man  from  mine  owner  to  farmer  has 
been  a  sufferer  ? 

Waste  from  indirect  freight  carriage 

It  is  ordinarily  supposed  that  a  straight  line 
is  the  shortest  distance  between  two  points. 
Every  day  the  railways  ignore  this  truism. 
They  haul  freight  in  all  sorts  of  roundabout 
ways  when  there  are  direct  ways  in  which 
it  could  be  carried.  I  do  not  refer  to  any  such 
trifling  out-of-the-way  hauls  as  twenty  or  fifty 
miles,  but  to  roundabouts  of  five  hundred  or 
even  a  thousand  miles.     Freight  is  carried  from 


32  An  American  Transportation  System 

Chicago  to  San  Francisco  via  New  Orleans,  which 
is  nearly  a  thousand  miles  out  of  the  direct  rail- 
way route.  Illustrations  of  this  kind  might  be 
multiplied  by  the  hundred.  Now,  one  cannot 
be  so  ignorant,  as  not  to  know  that  such  diversions 
of  traffic  entail  additional  cost  somewhere.  It 
may  be  that  by  some  legerdemain,  a  particular 
road  may  justify  itself  in  this  practice;  but  one 
has  only  to  remember  how,  if  all  freight  were 
carried  out  of  its  course  as  some  freight  is  now, 
the  actual  cost  of  transportation  would  soon  be 
doubled,  to  see  that  it  cannot  but  be  uneconom- 
ical to  do  so  in  any  event. 

Does  it  not  cost  money  to  run  freight  trains? 
"Yes,"  you  will  say,  "at  least  two  dollars  per 
mile."  Then  if  a  freight  train  be  diverted  iooo 
miles  from  its  direct  course,  does  not  that  action 
throw  away  $2000?  If  500  miles  $1000?  If 
50  miles  $100?  And  have  you  not  by  this  action 
depleted  the  earning  power  of  some  other  road 
which  might  have  made  the  haul  direct?  And 
if  so,  have  you  not  depleted  the  earning  power 
of  the  whole  transportation  system?  Add  to- 
gether, if  you  can,  the  several  deflections  from 
due  and  straight  courses  in  a  year  and  multiply 
that  by  twenty,  and  you  will  have  fabulous  figures 
representing  the  economic  waste  in  the  last  twenty 
years,  due  directly  to  the  failure  of  railroads  to 
regard  the  maxim  that  a  straight  line  is  the 
shortest  distance  between  two  points. 


Wrong  in  Our  Transportation  System  33 
Railway  excuses  for  waste  from  indirect  carriage 

But  you  of  the  railroads  ask  if  any  line  shall 
be  denied  the  right  to  build  itself  up,  even  at  the 
expense  of  another.  "Shall  we  be  denied  the 
right  severally  to  seek,  get  and  do  business  where 
we  can?  Does  not  the  country  demand  that  we 
each  remain  independent,  and  that  we  compete 
with  one  another?  Is  not  the  whole  force  of 
this  mighty  nation  now  being  brought  to  bear 
upon  us,  to  force  us  to  compete  one  with  the 
other,  even  though  by  doing  so  we  drive  each 
other  into  bankruptcy  ?  And  is  it  not  competition 
when,  at  so  great  a  loss  and  sacrifice,  we  take 
freight  from  another  road  and  haul  it  over  our 
own,  even  though  we  haul  it  a  thousand  miles 
out  of  the  way  to  do  so?"  Hail,  therefore, 
mighty  competition!  Blest  and  reposeful  theory 
of  statesmen  and  theoretical  economists,  hail! 
Lives  there  a  man — railroad  man,  statesman, 
farmerman — so  dull  that  he  cannot  see  that  if, 
instead  of  having  a  jumble  of  roads  and  systems 
each  trying  to  build  itself  up  at  the  expense  of 
the  other,  we  had  a  transportation  system  one  and 
indivisible,  not  a  pound  of  freight  would  ever 
be  carried  except  by  the  directest  course  that 
nature  would  allow  ? 

This  catalogue  of  economic  waste  due  to 
the  physical  operation  of  railways  might  be 
largely  extended.     But  let   us  sheer  off    in   the 


34  An  American  Transportation  System 

direction  of  waste  due   to   the    railway    as    a 
financial  operation. 

Financial  waste  from  duplication  of  railways 

It  is  the  tendency  of  half-lunatic  human  nature 
to  duplicate  business  enterprises  which  have 
shown  success.  To  the  majority  disaster  follows 
of  necessity.  Apprehended  bankruptcy  univer- 
sally throws  business  methods  to  the  winds. 
Actual  bankruptcy  destroys  the  last  fiber  of 
economic  responsibility.  Bankruptcy  is  the  very 
paradise  of  the  business  cut-throat.  Of  all  this 
the  upbuilding  of  our  railway  system  has  afforded 
remarkable  illustrations.  Suppose  a  certain  ter- 
ritory to  be  supplied  with  sufficient  railway  facili- 
ties. Suppose  another  railway  builds  into  that 
same  territory.  Now,  what  happens?  A  rail- 
way once  built  can  never  be  abandoned  or  de- 
stroyed. At  least,  I  believe,  such  a  thing  never 
did  happen  to  a  railway  of  any  consequence. 
Then  the  territory  has  two  railways — a  very 
necessary  one  and  a  very  superfluous  one,  for, 
most  likely,  the  business  is  barely  sufficient  to 
support  one.  If  both  are  to  be  supported  it 
must  be  by  a  raise  in  rates  which,  however,  rarely 
happens.  If  the  business  is  divided  between 
them,  as  always  happens  to  some  extent,  the 
revenues  of  the  first  road  are  reduced  below  the 
remunerative  point,  while  the  new  road  ekes  out 


Wrong  in  Our  Transportation  System  35 

a  miserable  existence.  If  a  drastic  rate  war 
follows,  as  has  usually  been  the  case,  the  road 
with  the  shortest  purse  soon  finds  itself  in  the 
possession  of  a  receiver.  Indeed,  the  stronger 
road  is  lucky  if  it  escapes  the  same  result,  espe- 
cially after  the  receiver  for  the  new  road  is  ap- 
pointed, for  a  receivership  is  a  very  paradise  of 
operative  irresponsiblity.  Now  who  has  been 
benefited  by  this  adventure?  Certainly  not  the 
investors  in  the  original  road ;  for  dividends,  before 
regularly  paid,  have  since  been  remitted  or  paid 
in  doubtful  obligations  of  the  company.  They 
are  fortunate,  indeed,  if  the  capital  itself  has  not 
been  seriously  imperiled.  Certainly  not  the  in- 
vestors in  the  new  road,  because  no  dividends 
were  ever  paid,  the  bonds  have  defaulted,  and  the 
only  hope  of  their  holders  ever  getting  anything 
lies  in  the  possible  chance  that  the  road  will  not 
be  eaten  up  by  receiver's  certificates. 

"Oh!"  you  say,  "but  the  community  has  been 
benefited.  It  has  two  railways  now — it  has 
competition." 

"What  of  that?  Was  not  your  old  road  able 
to  handle  all  the  business  of  its  territory  ? " 

"Yes." 

"Is  it  easier,  then,  for  your  community  to 
support  two  roads  than  one?" 

"No:  but  the  new  road  brought  lower  rates, 
and  the  old  road  was  spurred  on  into  giving  better 
service. " 


36  An  American  Transportation  System 

"And  was  the  old  road  in  better  condition  to 
give  you  lower  rates  and  better  service,  after 
it  was  deprived  of  part  of  its  revenue  by  the 
competition  of  the  new  road,  than  it  was  be- 
fore?" 

"Of  course  not,  but  it  did  it  just  the  same." 

"But  if  your  old  road  was  able  to  give  you  a 
better  service  and  lower  rates,  when  it  had  a 
monopoly  of  the  business,  why  did  not  the  com- 
munity compel  it  to  give  the  better  service  and 
the  lower  rates?" 

"We  tried  it.  In  fact  it  has  been  a  political 
issue  ever  since  I  can  remember.  But  the  railway 
always  controlled  the  legislature  or  the  commission 
or  the  court,  whichever  was  most  necessary." 

And  hence  the  people  have  come  to  look  for  no 
relief  from  railway  monopoly  except  through 
competition,  utterly  unmindful  of  the  fact  that 
in  the  end  they  had  two  or  more  railways  to  fight 
and  support,  instead  of  one. 

But  at  present,  the  endeavor  is  to  point  out 
that  the  building  of  an  unneeded  road  cannot 
but  result  in  economic  waste  in  some  direction. 
Almost  invariably  it  brings  losses  to  investors, 
and  becomes  a  burden  on  the  territory  into  which 
it  is  projected.  You  think  that  because  the  loss 
falls  primarily  on  the  investors  you  do  not  care: 
their  loss  helps  you.  You  are  mistaken.  Eco- 
nomic waste  never  dies.  It  simply  spreads  and 
diffuses   itself   until   it   is   no   longer   noticeable. 


Wrong  in  Our  Transportation  System  37 

But  rest  assured  that  you  will  not  escape  your 
share  of  it. 

Now  this  building  of  railways  into  territories 
already  supplied  has  characterized  the  develop- 
ment of  our  railway  system.  The  people  en- 
couraged such  uneconomical  construction,  not 
dreaming  that  they  could  be  burdened  by  too 
many  railways.  The  net  result  of  this  method  of 
railway  duplication,  working  in  perfect  harmony 
with  other  economic  wastes,  has  been,  that, 
one  time  or  another,  most  of  our  railways  have 
passed  through  bankruptcy,  with  consequent 
disastrous  losses  to  the  country. 

Economic  waste  from  railways  killing  water  trans- 
portation 

Again,  if  there  exists  a  different  and  cheaper 
mode  of  transportation  for  some  kinds  of  freight 
than  by  rail,  and  railways  are  enabled,  by  some 
means,  to  destroy  this  cheaper  mode  of  transporta- 
tion— to  kill  it  so  effectually  that  it  cannot  be 
revived — there  result  serious  loss  and  waste  in 
many  directions.  The  capital  invested  in  the 
cheaper  mode  of  transportation  is  lost ;  the  railway, 
while  killing  its  rival,  loses  money,  and  the  pub- 
lic permanently  loses  the  cheaper  facilities.  For 
once  the  railway  has  completed  its  work  of  de- 
struction, and  the  people  have  had  time  to  forget, 
rates  are  raised. 


38  An  American  Transportation  System 

Why,  when  the  rates  are  raised,  does  not  the 
older  and  cheaper  transportation  revive  ?  Because 
of  the  constant  menace  held  over  it  by  the  rail- 
way to  again  reduce  rates  below  the  profit  point. 
In  this  way  the  railway  system  has  destroyed  a 
large  amount  of  capital  invested  in  inland  and 
coast  water  transportation.  It  has,  at  the  same 
time,  made  this  destruction  the  excuse  for  sundry 
practices  of  a  most  inequitable  nature,  and  the 
country  has  lost,  or  is  in  process  of  losing,  one  of 
its  most  valuable  assets, — cheap  water  transporta- 
tion. How  has  a  dearer  mode  of  transportation 
been  able  to  supplant  a  cheaper  mode?  In  two 
ways,  one  of  which  was  criminal  and  the  other 
pitiful. 

An  industry  which  has  sundry  sources  of 
revenue  and  which  covers  a  large  territory,  can 
always  kill  another  kindred  industry  which  has 
only  one  source  of  revenue  or  is  confined  to  a 
narrow  territory.  The  great  industry  can  carry 
on  business  at  a  loss  in  its  narrow  competitive 
territory,  while  recouping  its  losses  in  its  wide 
territory,  until  its  rival  is  killed.  In  this  way 
have  all  great  monopolies  destroyed  their  single- 
handed  rivals.  But  what  we  consider  criminal 
in  the  trade  monopoly,  we  consider  right  in  the 
transportation  monopoly.  It  has  destroyed  and 
is  destroying  water  carriage,  partly  because  of 
the  relatively  wider  field  open  to  its  operations, 
partly  because  of  its  capacity  to  recoup  its  losses 


Wrong  in  Our  Transportation  System  39 

in  other  directions,  but  chiefly,  perhaps,  because 
a  stupid  government  has  not  only  sat  by  and  seen 
one  of  its  important  and  cheap  means  of  trans- 
portation killed,  but  has  actually,  by  law,  en- 
couraged that  destruction,  and  at  the  same  time 
permitted  the  imposition  of  intolerable  burdens 
and  unjust  discriminations  upon  millions  of  its 
people.  This  government  has  not  only  permitted 
the  railway  system,  where  it  came  in  competition 
with  water  transportation,  to  carry  freight  at  a 
price  so  far  beneath  cost  as  to  kill  the  latter,  but 
has  actually  allowed  the  railway  to  charge  up 
its  losses  so  sustained  to  other  points  along  its 
lines  which  were  beyond  the  reach  of  water  com- 
petition. Could  an  act  of  more  monumental 
stupidity  be  conceived?  From  the  standpoint 
of  economy  it  is  sheer  waste  to  allow  our  railway 
system  to  kill  our  water  system.  Of  this,  more 
hereafter. 

Dishonest    Railway    Capitalization    and 
Economic  Waste 

Entering  still  deeper  into  the  domain  of 
transportation  as  a  financial  operation,  let 
us  next  inquire  how  the  capital  which  built 
our  railways  was  raised,  how  it  was  ex- 
pended, and  what  the  methods  of  railway 
financiering  have  been,  are  and  will  continue 
to   be. 


40  An  American  Transportation  System 

Popular    misconceptions    concerning    corporations 
and  railway  ownership 

A  few  preliminary  words  are  necessary.  For 
instance,  rather  hazy  conceptions  are  current 
concerning  corporations.  Instead  of  rightly  re- 
garding them  as  aggregates  of  individuals,  some- 
times numbering  tens  of  thousands,  who  have 
combined  their  capital,  sometimes  reaching  into 
the  hundreds  of  millions,  for  the  purpose  of 
accomplishing  what  no  one  of  them  could  have 
done  alone;  corporations  have  come  to  be  looked 
upon  as  a  species  of  commercial  devil.  A 
close  partner  of  this  conception  is  that  our  great 
corporations  are  owned  by  the  men  who  manage 
them;  men  who  in  recent  times  it  has  become 
popular  to  refer  to  as  the  "predatory  rich." 
It  has  become  the  custom  to  speak  of  the  "Hill 
System  of  Railways,"  the  "  Harriman  System," 
tne  "Gould  System,"  the  "Ryan  System,"  the 
"  Vanderbilt  System,"  etc.,  etc.,  as  though  these 
men  personally  furnished  the  money  to  build 
the  roads  and  are  now  their  owners.  So  wide- 
spread seems  this  idea,  that  one  hears  from  quar- 
ters where  definite  information  ought  not  to  be 
wanting,  expressions  to  the  effect  that  the  rail- 
ways of  the  United  States  are  owned  by  the  so- 
called  "  predatory  rich"  of  this  country. 

A  moment's  consideration,  however,  should 
convince   the   most   imaginative   person   of   the 


Wrong  in  Our  Transportation  System  41 

utter  impossibility  of  the  idea  that  the  men  who 
in  the  past  stood  at  the  head  of  railway  corpora- 
tions, or  those  by  whose  names  the  systems  are 
now  known,  ever  could  have  provided  the  capital 
which  built  the  roads;  or  that  those  now  in  power 
ever  did,  or  now  do,  own  the  roads;  or,  relative 
to  the  total  capital  invested  in  them,  any  con- 
siderable part  of  them.  The  majority  of  the 
roads  were  built  before  the  enormous  private 
fortunes  of  the  present  day  were  dreamed  of  as 
possibilities.  It  should  be  sufficient  to  refer  to 
the  well-known  fact,  that  most  of  the  men  who 
have  been  identified  with  our  railroad  building, 
started  in  life  and,  indeed, in  the  railway  business, 
as  comparatively  poor  men.  With  the  exception 
of  the  last  few  years,  when  a  few  very  rich  men 
have  gone  in  for  railroad  building  just  to  provide 
themselves  with  occupation  in  their  declining 
years;  it  is  safe  to  say  that  the  combined  private 
fortunes  of  all  the  men  who  have  been  prominent 
in  railway  promotions,  would  not,  at  the  time 
they  began  that  business,  have  built  and  equipped 
a  thousand  miles  of  railroad. 

Now,  it  is  alleged  that  the  capital  invested  in 
the  railway  system  of  this  country,  is  upward  of 
seventeen  thousand  millions  of  dollars.  Call  up 
the  ghosts  of  all  the  departed  railway  kings,  and 
then  call  to  the  witness  stand  all  their  living 
descendants,  and  then  call  all  the  men  who  are 
now  directors,  executive  committees  and  presi- 


42  An  American  Transportation  System 

dents  of  our  transportation  systems  and  ask 
each  of  them  this  question:  Of  these  seventeen 
thousand  millions  of  dollars,  how  many  in  actual 
cold  coin  did  you  put  into  road-bed,  rails  and 
rolling  stock?  We  do  not  ask  you  how  many 
dollars  you  put  into  dead  and  rotten  roads  to 
galvanize  them  into  life,  nor  how  many  dollars 
you  have  made  by  dealing  in  their  securities, 
but  how  many  you  put  into  the  actual  work  of 
railroad  building?  And  the  echo  is  the  only 
answer.  Was  it  a  thousand  millions?  Let  it  be 
conceded  as  so  much.  Then  who  furnished 
the  other  sixteen  thousand  millions?  Who  is 
there  that  does  not  know  these  billions  came  from 
the  savings  of  millions  of  people,  in  this  and  other 
countries?  Will  you  say  that  it  was  furnished 
you  by  your  bankers,  your  trust  companies, 
your  insurance  companies,  your  savings  deposi- 
tories ?  Then  we  will  ask,  where  did  your  bankers, 
your  trust  companies,  your  insurance  companies 
and  your  savings  institutions  get  the  money 
they  loaned  you  ? 

You  see,  from  whatever  standpoint  you  view 
the  matter,  you  cannot  escape  the  conclusion 
that  it  was  the  people's  money,  and  not  your 
own,  that  made,  and  made  possible,  our  railway 
system.  It  is  the  people  who  bought,  and  who 
now  buy,  your  bonds — the  bonds  which  you 
know  right  well,  built  and  still  build  the  roads. 
Track  these  bonds  through  your  bankers,  your 


Wrong  in  Our  Transportation  System  43 

trust  companies,  your  syndicates,  your  under- 
writers, and  eventually  you  will  find  them  in  the 
hands  of  the  people  and  the  institutions  which 
care  for  their  savings.  Let  the  people  but  stop 
buying  them,  and  your  financiering  flickers  out 
like  a  burnt  up  candle. 

By  "  the  people"  I  do  not,  of  course,  mean  the 
very  poor,  nor  the  well-to-do,  nor  the  moderately 
rich  nor  the  very  rich  only.  I  mean  all  the  people 
whose  industry  and  saving  have  enabled  them 
to  acquire  a  surplus  over  immediate  needs,  and 
who,  through  some  channel,  have  invested  the 
surplus  in  supposedly  good  securities.  This  sur- 
plus, usually  small  in  each  individual  case,  ag- 
gregates an  enormous  sum.  It  must  not  be 
forgotten  that  about  every  ten  years  the  entire 
wealth  of  the  world  passes  through  the  hands  of 
those  who  toil,  and  that  some  of  it  sticks  to  those 
hands,  as  appears  from  the  nearly  four  thousand 
millions  of  deposits  in  our  savings  banks  and  the 
nearly  twelve  thousand  millions  of  deposits  in 
all  institutions  of  deposit.  It  is  safe  to  say  that, 
easily,  every  ten  years  the  railways  pay  out, 
directly  and  indirectly  in  wages,  the  total  cost- 
value  of  our  entire  railway  system. 

The  wonder  has  always  been  to  me,  why  those 
who  labor  with  their  hands  do  not  own  all  the 
wealth — all  the  industries — of  this  country.  For 
if  they  but  saved  ten  per  cent  of  their  wages, 
there  is  not  an  industry  in  the  United  States 


44  An  American  Transportation  System 

which,  in  three  generations,  would  not  be  owned 
by  those  who  do  the  actual  work;  provided, 
of  course,  they  were  not  perennially  robbed  by 
the  rottenness  of  the  securities  in  which  they 
invested  their  savings.  But  this  is  taking  me 
a  little  in  advance  of  my  theme;  not  so  very  far, 
however,  for  the  question  now  is:  Who  built 
and  who  own  the  railways  of  the  United  States? 

Ownership  of  railway  securities 

Of  course  it  is  a  recognized  fact  that  the  over- 
whelming majority  of  railway  bonds,  aggregating 
about  nine  billions  of  dollars,  are  held  by  the 
people.  Those  who  manage  our  railways  have 
a  more  profitable  use  for  their  money  than  invest- 
ing it  in  securities  yielding,  say,  four  per  cent. 
But  it  is  not  so  generally  known  that  railway 
stocks  are  also  widely  distributed. 

It  is  said  that  the  entire  stocks  of  our  railway 
corporations  are  bought  and  sold  three  times  a 
year  on  the  New  York  Stock  Exchange.  That 
is,  the  entire  capital  stock  changes  hands  three 
times  every  year.  Say  ninety  per  cent  of  these 
sales  are  fictitious,  yet  if  only  ten  per  cent  are  gen- 
uine, it  follows  that  thirty  per  cent  of  all  our  rail- 
way stocks  change  holders  every  year,  and  so, 
in  less  than  three  years  and  one-half,  the  entire 
capital  stock  changes  hands.  These  facts  I  pray 
you  to  bear  in  mind. 


Wrong  in  Our  Transportation  System  45 

Now,  what  do  the  books  of  the  railway  corpora- 
tions show  as  to  the  number  of  actual  stockholders  ? 
From  a  high  authority — Henry  S.  Haines  (Re- 
strictive Railway  Legislation,  1906,  p.  77) — I  take 
the  liberty  to  make  the  following  quotation. 
"In  1897  the  railroad  capitalization  was  distri- 
buted among  950,000  stockholders, "  etc.  If  these 
figures  be  correct  for  that  date,  there  must  be  a 
good  many  more  stockholders  now  (1908)  or, 
at  least,  were  before  our  late  panic.  As  of  June 
30,  1907,  the  total  capital  stock  of  all  our  railway 
corporations  aggregated  a  round  $7,450,000,000. 
If  this  capital  stock  be  divided,  as  it  usually  is, 
into  shares  of  the  par  value  of  one  hundred  dollars 
each,  then  there  were  outstanding  74,500,000 
shares  of  stock.  If  these  were  held  by  1,000,000 
stockholders,  the  average  holding  of  each  stock- 
holder would  be  74^  shares? 

I  do  not  find  it  possible  to  believe  that  these 
figures  are  correct.  To  me  it  seems  improbable 
that  our  railway  shares  are  so  widely  distributed 
among  the  people.  But  if  these  estimates  be 
half  true — as  I  conceive  to  be  most  likely — what 
becomes  of  all  this  boisterous  talk  about  our 
railways  being  owned  by  the  "predatory  rich?" 
Does  it  not  seem  rather  more  probable  that  the 
overwhelming  majority  of  even  railway  stocks 
are  owned  by  what,  in  contradistinction  to  the 
"predatory  rich,"  we  call  the  moderately  poor? 

But  if  we  turn  from  these  estimates  of  the 


46  An  American  Transportation  System 

total  holdings  to  the  actual  number  of  shareholders 
in  certain  large  railway  corporations,  we  shall 
find  our  estimates  quite  verified.  For  instance, 
the  Pennsylvania  reported,  in  1908,  58,736  known 
stockholders,  or  an  average  holding  of  106  shares 
by  each  stockholder  (par  value  $50  per  share). 
Are  these  58,736  persons  among  the  "predatory 
rich?"  If  so  the  number  of  that  interesting 
class  must  greatly  have  multiplied  since  their 
last  census  was  taken. 

Railway  ownership  and  railway  control 

One  more  fact,  and  that  a  fact  of  great  signifi- 
cance, must  be  mentioned.  Of  the  seven  billions 
odd  of  railway  stocks,  about  two  and  a  quarter 
billions  are  owned  by  the  railway  corporations 
themselves.  In  other  words,  the  railway  corpora- 
tions, chiefly  the  corporations  controlling  great 
railway  systems,  have  bought  the  stock  of  one 
another,  until  the  corporations  themselves  own 
about  30%  of  the  total  capital  stock  outstanding. 
And  significant  enough,  the  stock  which  they 
have  bought  is,  for  the  most  part,  what  is  called 
"common  stock,"  which  has  the  peculiarity  of 
being  the  stock  which  votes  to  elect  directors. 

Thus  it  will  be  seen  that  it  is  by  no  means 
necessary  that  the  managers  of  corporations 
should,  in  their  individual  capacity,  own  the 
majority  of  the  stock  of  the  corporations  which 


Wrong  in  Our  Transportation  System  47 

they  control.  It  is  quite  sufficient  that  their 
corporation  owns  a  control  and  that  they,  the 
managers,  vote  that  control  as  they  see  proper. 
Moreover,  the  control  of  this  vast  amount  of 
corporate  stock  enables  the  managers  to  exercise 
a  potent  influence  upon  the  stock  market,  and 
when,  in  addition,  as  has  been  known  to  happen, 
the  managers  are  given,  or  assume,  power  to  use 
the  surplus  cash  of  their  corporations  in  the 
stock  market, — well,  you  will  see,  that  while  the 
people  built  and  own  their  railway  system,  they 
have  no  more  to  say  about  its  control,  or  how 
their  investment  shall  be  managed,  than  though 
they  were  inhabitants  of  Mars. 

And  now  let  us  proceed  to  the  question  of 
economy  in  our  transportation  system  as  a  finan- 
cial operation. 

The  railway  debt  a  charge  on  the  nation 

Many  of  the  wrongs  of  the  past  may  be  buried  and 
forgiven,  but  not  such  as  perpetuate  themselves. 
The  books  of  the  railways  show  that  the  total 
amount  of  their  assets  on  the  30th  day  of  June, 
1907,  was  $18,649,289,250.  Splendid!  Magnifi- 
cent !  Shall  we  not  say  we  are  rich  when  we  have 
railway  assets  alone  valued  at  eighteen  billions? 
Alas !  what  a  pity  it  is  that  there  are  two  sides  to 
an  account.  No  sooner  am  I  puffed  up  by  the 
gorgeous  showing  of  this  asset  side  of  the  account, 


48  An  American  Transportation  System 

than  I  am  completely  deflated  by  the  liability 
side.  For  our  railways  owe  $18,649,289,250. 
Here  is  the  Janus-faced  monster  that  you  may 
see  for  yourself. 

Assets 

Cost  R.  R.  and  Equipment $13,364,275,191 

Stocks  &  Bonds  owned 2,884,031,173 

R.  Estate  &  other  Invest's 738,843,199 

Cash,  Bills  Rec.  &  C't.  Accts 979,730,908 

Materials  &  Supplies 224,237,534 

Other  Assets 208,171,082 

Sinking  Funds 159,592,350 

Profit  &  Loss 90,407,813 

$18,649,289,250 

Liabilities 

Capital  Stock 7,458,126,785 

Bonded  Debt 8,228,245,257 

Other  Bond  Obligations 815,041,027 

Accrued  Liabilities 94,938,347 

Misc.  Liabilities 75,450,828 

Bills  Payab'e  &  C't.  Accts 857,734,167 

Sinking  Funds,  etc 239.727i545 

Profit  &  Loss 880,025,294 

$18,649,289,250 

All  book-keeping  quibbles  aside,  is  not  this  very 
much  like  a  man  who  owns  a  farm  which  he  values 
at  $10,000  and  for  which  he  owes  $10,000? 

Now  the  significance  of  this  balance  sheet  shines 
out  of  its  two  faces  so  any  man  who  has  eyes  can 
see  it.  In  the  first  place,  it  is  evident  we  have 
acquired  our  railway  system  by  borrowing  money. 
In  the  second  place,  it  is  equally  evident  we  have 
acquired  an   enormous   indebtedness.     Yes,   but 


Wrong  in  Our  Transportation  System  49 

who  owes  this  debt?  There  's  the  rub.  You 
say  it  is  the  railroads,  of  course.  Not  so:  it  is  as 
much  the  debt  of  the  nation  as  is  its  national 
debt.  Absurd,  you  say.  But  wait  a  minute. 
Must  the  nation  have  ships  of  war?  Yes.  Well, 
which  could  the  nation  dispense  with  and  suffer 
least,  its  battle-ships  or  its  railways?  You  see 
the  railway  is  a  national  necessity.  Sanity  would 
enable  us  to  get  along  without  battle-ships,  but 
the  saner  we  are  the  more  railways  we  require. 

"But,"  you  ask,  "may  not  railways  go  into 
bankruptcy  and  thus  their  indebtedness  be  wiped 
out?" 

"Yes,  verily,  a  railway  may  go  into  bankruptcy 
and  its  investors  may  lose  every  blessed  dollar 
they  put  into  it,  but  you  are  wrong  in  supposing 
that  the  indebtedness  can  be  wiped  out. " 
^The  unique  thing  about  a  railway  is  that  bank- 
ruptcy does  not  wipe  out  its  debts.  I  say  this 
not  because  in  past  history,  our  railways  have 
nearly  always  emerged  from  the  bankruptcy  court 
loaded  with  a  greater  debt  than  when  they  en- 
tered its  sacred  portals;  for  that,  though  true, 
would  be  mere  quibbling.,  I  say  it  because  na- 
tional indebtedness  is  inherent  in  the  railway  as 
an  institution.  Any  other  industry  may  become 
bankrupt  and  quit,  die,  cease  to  exist.  But  a 
railroad  whether  bankrupt  or  solvent  must  con- 
tinue to  live — it  must  be  operated,  maintained 
and  sustained.! 


5©  An  American  Transportation  System 

If  you  never  paid  a  dollar  of  the  debt  of  the 
railways  and  if  you  never  paid  a  cent  of  interest 
on  that  debt  nor  a  cent  of  dividend,  the  nation 
would  still  have  to  pay  about  three-fourths  as 
much  as  it  now  pays  for  the  mere  pleasure  of 
having  railways.  To  keep  our  railway  system 
alive  and  in  working  order — none  too  good — cost 
last  year  $1,769,417,903.  Even  if  we  were  so 
contemptible  as  to  deny  to  invested  capital  a 
cent  of  return,  no  amount  of  political  buncombe 
can  relieve  the  nation  of  the  cost  of  operation  and 
maintenance.  Last  year  the  nation  paid  $2,602- 
757,503  as  the  total  cost  to  it  of  its  railways 
for  that  year.  This  was  about  14.46%  interest 
on  the  capital  alleged  to  be  invested  in  our  rail- 
way system.  Of  this  amount  about  io£%  was 
paid  for  the  actual  operation  of  the  system ;  which 
was  a  charge  as  essentially  national,  and  a  lot 
more  remunerative  to  the  people,  than  the  cost 
of  running  the  national  government.  The  remain- 
der— less  than  4% — was  paid  as  interest  on  the 
capital  invested  and,  provided  the  investment  was 
honest,  it  was  as  honorable  a  charge  upon  the 
nation  as  was  the  payment  of  the  interest  on  our 
national  debt. 

Now,  since  the  railroad  is  a  national  necessity, 
since  its  maintenance  is  an  inevitable  fixed  charge 
upon  the  nation,  since  the  system  was  acquired 
with  borrowed  capital,  and  since  the  nation  is 
honorably  bound  to  allow  fair  interest  on  the 


Wrong  in  Our  Transportation  System  5 1 

borrowed  capital,  we  may  next  inquire  whether 
the  system  was  economically  acquired,  and, 
more  especially,  whether  the  acquisition  of  addi- 
tional railway  facilities  is  to  be  economical. 

Economic  waste  in  acquisition  of  railway  system 

We  say  if  a  man  pays  two  dollars  for  what 
he  could  as  readily  have  obtained  for  one,  that 
he  is  not  practicing  economy.  Also,  if  a  man 
can  himself  go  to  his  banker  and  borrow  money, 
we  would  call  him  strange  if  he  paid  his  broker 
5  %  to  do  the  same  thing  for  him ;  if  he  paid  his 
broker  10%,  we  would  call  him  grossly  wasteful 
of  his  means;  if  he  paid  25%,  we  would  call  him 
a  fool ;  and  if  he  paid  40%,  we  would  say  he  should 
certainly  have  a  guardian  appointed.  Yet  such 
a  man  is  the  American  people.  The  thing  the 
man  bought  is  his  railway  system;  he  bought  it 
with  borrowed  money;  the  broker  he  employed 
was  the  railway  promoter,  and  he  paid  him  40% 
commission.  At  least  this  is  so  alleged  by  those 
who  pretend  to  know.  They  tell  us  that  not 
more  than  75%  of  the  nine  billions  of  dollars  of 
bonds  which  our  railway  system  owes  to-day, 
ever  found  its  way  into  the  treasury  of  the  rail- 
way corporations,  or  was  actually  expended  in  the 
construction  of  railways.  And  they  tell  us  that  for 
the  seven  billions  and  more  of  stock  that  has  been 
issued,  the  railway  corporations  never  received 


52  An  American  Transportation  System 

more  than  50%  in  cash  or  other  things  of  value. 
And  they  tell  us  that  the  American  people  are 
honorably  bound  forever  and  forever  to  pay  inter- 
est at  a  reasonable  rate  on  the  face  value  of  these 
bonds  and  stocks. 

There  are  some  people  who  even  say  worse 
things  than  these.  They  say  that  the  railways 
were  built  out  of  the  bonds  and  the  money  derived 
from  their  sale,  and  that  the  stock  was  given  away 
as  a  bonus.  Of  course  they  do  not  say  these  things 
of  all  our  railways,  but  they  say  it  of  our  railway 
system  as  a  whole.  Personally  I  do  not  know, 
except  in  a  most  general  way,  whether  these 
allegations  are  true,  but  if  they  are  true,  then  we 
have  certainly  acquired  our  railways  in  a  most 
uneconomical  way,  provided  we  could  have  gotten 
them  by  means  which  would  have  saved  the  pro- 
moters' commission.  But  while  I  do  not  know 
whether  these  things  are  true  of  the  remote  past, 
I  do  know  of  certain  recent  and  present  practices 
which  lend  color  to  the  allegations. 

Increase  of   Railway   Facilities   and  Rail- 
way Debt 

Fundamental  principles 

I  assume  this  to  be  a  fundamental  principle 
of  railway  economics,  to  wit:  That  railway 
facilities   should   increase   in   proportion  to   the 


Wrong  in  Our  Transportation  System  53 

increase  of  railway  debt.  In  this  respect  a  rail- 
way does  not  differ  from  any  other  kind  of  indus- 
try, or,  for  that  matter,  from  an  individual.  If 
debt  increases  out  of  proportion  to  the  value 
of  something  acquired,  which  represents  the 
debt,  there  is  lack  of  economy  somewhere.  In  the 
case  of  the  railway  this  something  acquired  is 
transportation  facilities.  This  is  a  matter  of 
very  great  importance  to  the  public,  not  only 
because  the  public  requires  a  fairly  constant 
increase  of  railway  facilities  equal  to  the  develop- 
ment of  the  country,  but  also  because  it  has  to 
foot  the  bill. 

The  exact  question  involved 

It  is  not  my  purpose  to  consider  here  the  vexed 
question  of  how  much  it  actually  costs  per  mile 
to  build,  or  produce,  a  railway,  nor  the  still  more 
vexed  question  of  how  much  it  has  actually  cost 
to  bring  our  railways  into  existence.  The  question 
is  now:  What  is  the  alleged  comparative  cost  of 
producing  our  railways  at  different  periods  of  the 
entire  railway  era?  In  other  words,  we  are  to 
compare  the  increase  of  railway  facilities  with 
the  alleged  cost  of  such  increase. 

The  first  fact — the  increase  of  railway  facilities — 
is  fairly  well  known.  For  the  second  fact — the 
alleged  cost  of  the  facilities — we  are  obliged  to 
rely  entirely  upon  the  books  kept  by  the  railways. 


54  An  American  Transportation  System 

I  cannot  guarantee  that  these  books  disclose 
the  exact  facts,  but  this  much  may  be  stated 
without  fear  of  contradiction,  that  the  facts 
which  they  do  disclose>  are  not  unfair  to  the 
railways.  At  any  rate,  they  cannot  complain 
if  we  use  the  facts  which  they  furnish. 

The  periods  chosen  for  the  purpose  of  this 
comparison  are  three,  as  follows:  the  first  period 
covers  the  time  from  the  beginning  of  railway 
making  down  to  1890  (sometimes  1892) ;  the 
second,  the  ten-year  period,  1 890-1 900,  and  the 
third,  the  six-year  period,  1900-1906.  The 
selection  of  these  periods  has  not  been  arbitrary. 
As  is  well  known,  the  Interstate  Commerce  Com- 
mission was,  by  the  law  of  1887,  granted  power 
to  collect  all  the  facts  of  importance  bearing  upon 
railway  problems;  but  it  was  not  until  1890 
that  the  statisticians  got  into  good  working 
shape.  Since  that  time  they  have  furnished  us 
fairly  consistent  data  each  year,  and  there  is  a 
chance  now  to  institute  comparisons.  Unfortu- 
nately it  was  not  until  1892  that  the  consolidated, 
or  general,  railway  balance  sheet  disclosed  the 
number  of  miles  covered  by  it.  It  is  therefore 
worthless  for  purposes  of  comparison  before  that 
date. 

The  measure  or  unit  of  railway  facilities 
I  have  found  no  little  difficulty  in  satisfying 


Wrong  in  Our  Transportation  System  55 

myself  as  to  a  proper  yardstick,  or  unit,  whereby 
to  measure  railway  facilities,  yet  if  we  are  to 
make  any  progress  in  this,  as  in  all  other  matters, 
we  must  first  agree  upon  some  standard  of 
measurement.  It  is  not  so  very  important 
what  this  unit  is,  so  long  as  we  uniformly 
employ  it  in  all  comparisons,  but  if  we  are 
able  to  ascertain  some  one  facility  which  may 
be  taken  fairly  to  represent  all  other  facil- 
ities, that  one  will  be  the  most  appropriate 
unit.  Naturally  one  turns  to  "the  mile"  of 
track  as  the  unit  of  carrying  capacity,  and 
I  believe  it  has  been  universally  so  employed. 
If,  therefore,  at  a  certain  period  you  have  a 
certain  number  of  miles  of  track,  and  at  an- 
other period  you  have  an  increased  mileage, 
you  say  your  railway  facilities  have  increased 
by  the  increase  in  mileage.  This  means,  of 
course,  that  all  the  other  facilities  which  go 
to  make  up  a  railway  have  increased  accord- 
ingly. But  when  you  come  to  consider  the 
question  of  "cost,"  this  does  not  necessarily 
mean  that  the  actual  cost  of  each  additional 
mile  of  road  has  increased,  but  that  you  have 
saddled  upon  "the  mile,"  the  total  cost  of 
all  other  facilities.  In  the  calculations  which 
follow,  I  will  therefore  take  the  mileage  of 
single  track  as  representing  the  aggregate 
of  railway  facilities,  and  the  increase  in 
such     mileage  in  one    period    over    a    preced- 


56  An  American  Transportation  System 

ing  period  as  representing  the  increase  in   fa- 
cilities. * 

The  measure  or  unit  of  railway  u cost" 

If  we  knew  the  actual  cost  of  the  production 
of  our  railways  at  different  periods,  we  would 
simply  divide  the  aggregate  cost  by  the  aggregate 
number  of  miles,  and  thus  arrive  at  the  compara- 
tive cost  per  mile  for  the  different  periods.  But 
we  do  not  know  the  actual  cost,  and  therefore 
men  have  pondered  much  to  know  what  sum 
should  be  divided  by  mileage  in  order  to  reach  a 
fair  knowledge  of  the  cost  per  mile.  Now,  so 
far  as  I  know,  there  are  five,  and  only  five,  possible 
methods  of  reaching  this  conclusion,  and,  so  far 
as  this  book  is  concerned,  it   makes  but  little 

»  It  would  seem  that  this  paragraph  is  sufficiently  clear, 
but  it  has  been  suggested  by  a  friend,  conversant  with  rail- 
way matters,  that  it  may  be  open  to  the  criticism  that,  in 
the  writer's  mind,  railway  facilities  consist  of  track  and 
equipment  only;  and  it  has  been  suggested  that  railway 
facilities  be  more  fully  defined.  Of  course,  they  consist  not 
only  of  equipment  and  single,  or  main  track,  but  of  all  other 
trackage — second  tracks,  third  tracks,  etc.,  side  tracks, 
spur  tracks,  switch  tracks,  yard  tracks,  etc.  Likewise,  they 
include  terminals,  stations,  freight  sheds,  round  houses, 
machine  shops,  yards,  etc.  In  short,  "facilities"  include 
every  material  item  which  may  enter  into  the  physical  oper- 
ations of  railways,  and,  therefore,  they  include  docks,  boats, 
lighters  and  barges  as  well  as  tunnels,  such  as  are  now  being 
constructed  under  the  Hudson  River. 

But  railway  facilities  do  not,  in  my  opinion,  include  real 
estate  owned  by  railways,  but  not  used  in  railway  operation, 


Wrong  in  Our  Transportation  System  57 

difference  which  of  these  methods  be  followed. 
But  in  fairness  to  all,  and  especially  to  the  rail- 
ways, I  purpose  to  set  forth  all  the  methods. 
They  may  be  briefly  described  as  follows: 

1. — The  railways  have  kept  what  is  called 
a  "cost  of  road"  account.  In  this  account  is 
supposed  to  have  been  entered  every  item  of 
legitimate  railway  cost  which  appertained  to  the 
making  of  a  railway  ready  for  its  rolling  stock. 
If,  therefore,  you  divide  the  aggregate  of  the 
"cost  of  road"  account  by  the  aggregate  mileage, 
you  will  get  what  the  railways  claim  it  has  cost 
to  produce  our  railways  exclusive  of  equipment. 
This  we  will  call — 

CALCULATION  NO.  I, 

based  on  the  alleged  "cost  of  roads"  as  shown 

nor  coal  mines,  except  such  as  are  used  to  provide  the  com- 
pany with  fuel  for  its  own  use ;  and  it  would  require  a  lively 
imagination  to  bring  into  the  list  of  railway  facilities,  stocks 
and  bonds  of  other  railways  and  manufacturing  industries 
owned  by  railway  corporations. 

Railway  facilities  must,  therefore,  be  clearly  distinguished 
from  railway  assets,  which  latter  may  include  anything 
which  a  corporation  engaged  in  transportation  may  be  allowed 
to  own.  Facilities  include  such  of  these  assets  as  are  actually 
employed  in  transportation  and,  therefore,  serve  a  public 
purpose. 

The  important  point  to  be  borne  in  mind  at  present  is, 
that  in  attempting  to  find  a  unit  measure  of  railway  facilities, 
and  of  their  increase,  we  charge  the  single  trackage  not  only 
with  its  own  proper  cost  but  with  the  cost  of  every  other 
legitimate  facility  acquired  by  our  railways. 


58  An  American  Transportation  System 

by  the  consolidated  balance  sheets  of  the  rail- 
ways (See  U.  S.  Statistics  of  Railways,  1892, 
p.  68;  1900,  p.  96;  1906,  p.  105).  Comparative  for 
the  periods  to  1892,  1892-1900,  1900-1906. 

Mileage  Covered 
Balance  sheet  1892,    143,516 

"      1900,   181,437;  increase  over  1892,37,921  miles 
"      1906,  208,310;       "         "      1900,26,873       " 

Cost  of  roads 
1892,  $8,078,516,736 

1900,    9,674,952,371;  increase  over  1892,       $1,596,435,635 
1906,  11,588,922,421;  "     1900,         1,913,970,050 

Cost  of  total  mileage  prior  to  1892. 
$8,078,516,736-5-143,516  (miles)  -  $56,290  per  mile 

Cost  of  mileage  acquired  189 2-1 900. 
$1,596,435,635-5-37,921  (miles  acquired)  =  $42,098  per  mile 

Cost  of  mileage  acquired  1900-1906. 
$1,913,970,050-5-26,873  (miles  acquired)  «■  $71,222  per  mile 

Increased  cost  of  third  period  over  first       $  14,930  per  mile 
Increased  costof  third  period  oversecond  $29,124     "      " 

2. — In  addition  to  the  account  called  "cost 
of  road,"  the  railways  have  kept  an  account 
called  "cost  of  equipment."  The  joint  accounts 
are  supposed  to  include  every  item  of  cost  entering 
into  the  making  and  equipment  of  our  railways. 
The  division  of  the  aggregate  of  these  accounts 
by  the  acquired  mileage  during  any  period,  will 
show  the  alleged  cost  of  the  mile  of  road ;  the  cost 
of  equipment  being  thus  saddled  onto  mileage. 
This  we  will  call — 


Wrong  in  Our  Transportation  System  59 

CALCULATION  NO.  2, 

based  on  alleged  "cost  of  road  and  equipment" 
accounts  as  shown  by  the  consolidated  balance 
sheets  of  the  railways  as  they  appear  in  the  U.  S. 
Statistics  of  Railways.  Comparative  for  the  pe- 
riods to  1892,  1892-1900,  1900-1906. 

The  mileage  covered  is  the  same  as  in  calcula- 
tion No.  1. 

Cost  of  roads  and  equipment. 
1892,  $8,564,394,830 

1900,  10,263,313,400;  increase  over  1892,  $1,698,918,570 
1906,  12,420,287,938;  "     1900,    2.156.974>538 

Cost  of  road  and  equipment  to  1892. 
$8,564,394,830-5-143,516  (miles)  -  $59,675  Per  mile 

Cost  of  road  and  equipment  acquired  1892-1900. 
$1,698,918,570-^37,921  (miles  acquired)  =  $44,801  per  mile 

Cost  of  road  and  equipment  acquired  1900- 1906. 
$2,i56,974,538-=-26,873  (miles  acquired)  «■  $80,265  Per  mue 

Increased  cost  of  third  period  over  first       $20,590  per  mile 
"  "     "      M         "         "    second  $35,464  per  mile 

3. — The  third  method  of  ascertaining  what 
our  railways  have  cost  is  entirely  different  from 
the  first  two  methods.  They  were  based  on  the 
supposed  cost  of  acquiring  the  roads.  The  third 
method  is  based  on  the  amount  of  "stocks  and 
bonds"  which  the  railways  have  issued.  It  is 
supposed  that  these  "stocks  and  bonds"  have 
been  used  by  the  railways  in  paying  the  costs 


60  An  American  Transportation  System 

of  acquiring  the  roads.  This  is  the  method  pur- 
sued by  the  Interstate  Commerce  Commission 
in  estimating  the  amount  of  capital  employed  by 
the  railways  in  the  United  States  at  the  present 
time.  Formerly  the  Commission  pursued  another 
method,  which  will  be  stated  later.  We  are  also 
favored  with  the  necessary  data  for  this  calculation 
by  Poor's  Manual  of  Railways,  which  is  the  highest 
authority  in  the  world  on  all  matters  relating 
to  American  railways.  I  should  add  that  while 
the  Manual  does  not  pursue  this  method  for  the 
ascertainment  of  railway  capital,  it  gives  the 
necessary  figures  by  which  it  may  be  done.  I 
have,  therefore,  added,  for  the  sake  of  compari- 
son, the  figures  of  the  Manual  in  addition  to  the 
government  figures.     This  we  will  call — 

CALCULATION  NO.  3, 

based  on  the  amount  of  railway  "stocks  and 
bonds"  issued  as  shown  by  the  U.  S.  Statistics 
of  Railways  and  Poor's  Manual.  Comparative 
for  the  periods  to  1890,  1890-1900,  1900-1906. 

Mileage  covered  (U.S.S.  of  Rys.) 
1890,  156,402 

1900,  186,876;  increase  over      1890         30,474  miles 
1906,  214,472;         "  1900         27,596      " 

Stocks  and  bonds  issued. 
1890,  $8,984,234,616 

1900,  11,491,034,960;  increase  over  1890  $2,506,800,344 
1906,  14,570,421,478;  "     1900     3.°79,386>5l8 


Wrong  in  Our  Transportation  System  61 

Stocks  and  bonds  1890. 
$8,984,234,616-7-156,402  (miles)  -  $57,443  per  mile 

Increase  in  stocks  and  bonds  1890-1900. 
$2,506,800,344-7-30,474  (miles  acquired)  -  $82,260  per  mile 

Increase  in  stocks  and  bonds  1 900-1 906. 
$3,079,386,518-5-27,596  (miles  acquired)  -  $111,588  per  mile 

Mileage  covered  (Poor's  Manual) 
1890,  163,359 

1900,  192,161;  increase  over      1890         28,802  miles 
1906,  218,433;  "         1900         26,272      " 

Stocks  and  bonds  1890. 
$9,645,696,585-5-163,359  (miles)  -  $59,046  per  mile 

Increase  in  stocks  and  bonds  1 890-1 900. 
$1,917,242,419-5-28,802  (miles  acquired)  =  $66,566  per  mile 

Increase  in  stocks  and  bonds  1900-1906. 
$3,394,577,760-5-26,272  (miles  acquired)  ■=  $129,208  per  mile 

Increase  stocks  and  bonds  third 

period  over  first  (U.S.S.  Rys.) . .  .   $54,145  per  mile 
Increase  stocks  and  bonds  third 

period  over  second $29,328  per  mile 

Same,  third  period  over  first  (Poor's  Manual)  $70,152  per  mile 
"         "         "         "  second     "  "  62,642    "      " 

4. — In  addition  to  obligations  called  stocks  and 
bonds,  the  railways  owe  sundry  other  obligations, 
some  of  which  are  essentially  bonds  in  character, 
though  not  secured  by  mortgages  on  the  physical 
properties  of  the  railways.  These  forms  of  debt 
usually  hang  in  the  balance,  with  the  hope  on  the 
part  of  the  railways,  to  put  them  in  the  form  of 
permanent  obligations  on  the  arrival  of  favorable 
circumstances.     Now,  in  1888,  when  the  Inter- 


62  An  American  Transportation  System 

state  Commerce  Commission  began  collecting 
railway  data,  it  was  quite  positive  that  the  kinds 
of  obligations  above  referred  to  should  be  included 
in  the  capital  account  of  the  railways  along  with 
stocks  and  bonds,  and  they  were  so  included  in 
all  their  reports  until  1896,  when  they  were  elim- 
inated "at  the  request  of  the  executive  com- 
mittee of  the  Association  of  American  Railway 
Accounting  Officers,"  (Statistics,  1896,  p.  45)  and 
have  not  since  appeared  in  the  government's 
Summary  of  Railway  Capital.  At  the  time  these 
obligations  were  cut  out  of  the  government's 
railway  book-keeping,  they  had  mounted  to  the 
respectable  aggregate  of  $613,000,000.  No  doubt 
the  elimination  was  especially  welcome  to  the 
railways,  for,  in  the  last  statistics  published 
(1906,  p.  61),  they  had  reached  $1,100,977,164, 
which,  the  government  accountant  innocently 
adds,  would  have  increased  the  railway  capital 
$5133  per  mile. 

It  would  appear  that  the  managers  of  Poor's 
Manual  were  not  quite  so  accommodating  to  the 
aforesaid  Association  as  the  Commission,  for  the 
Manual  has  always  added  to  stocks  and  bonds 
the  other  obligations  of  the  railways,  which  are 
essentially  as  much  a  part  of  railway  capital  as 
are  stocks  and  bonds  (See  Manual,  1908,  p. 
clxxviii.).  This,  then,  is  the  fourth  method  of 
arriving  at  what  Poor  calls  the  "approximate 
cost  of  road  and  equipment."     It  is  now  my 


Wrong  in  Our  Transportation  System  63 

purpose  to  add  to  the  government  reports  the 
items  eliminated  from  them  since  1896,  and, 
for  the  sake  of  fullness  and  fairness,  we  will  place 
along  with  the  government's  figures  those  from 
the  Manual.     This  we  will  call — 

CALCULATION  NO.  4, 

based  on  the  total  issues  of  stocks,  bonds  and 
miscellaneous  obligations  commonly  taken  to 
constitute  railway  capital  and  the  approximate 
cost  of  our  railways. 

Comparative  for  the  periods  to  1890,  1890-1900, 
1900— 1906. 

Mileage  involved  (U.S.S.  of  Rys.)  same  as  cal- 
culation No.  3. 

Stocks,  bonds  and  miscellaneous  obligations. 
1890,  $9,437,343,420 

1900,  12,085,822,830;  increase  over  1890         $2,648,479,410 
1906,  15,671,398,642;        "         "       1900  3>585.575.812 

Stocks,  bonds  and  miscellaneous  obligations  1890. 
$9.437.343.420-j-i56,402  (miles)  =  $60,340  per  mile 

Increase  in  same  1 890-1 900. 
$2,648,479,4io-=-30,474  (miles  acquired)  =  $86,909  per  mile 

Increase  in  same  1900- 1906. 
*3.585»575.8l2-*-27»592  (miles  acquired)  =  $129,949  per  mile 

Mileage  involved  (Poor's  Manual). 
1890,  163,359 

1900,  192,161;  increase  over      1890         28,802 
1906,  218,433;  "         1900         26,272 

Stocks,  bonds  and  misc.  obligations. 
1890,  $10,020,925,215 

1900,     11,891,902,339;  increase  over  1890  $1,870,977,124 

1906,     i5.593.548,95I".                       "     I9°°  3. 7QI. 646, 618 


64  An  American  Transportation  System 

Stocks,  bonds  &  misc.  obligations  1890. 
$10,020,925,215-5-163,359  (miles)  -  $61,343  per  mile 

Increase  in  same  1890-1900. 
$1,870,977,124-5-28,802  (miles  acquired)  ■=  $64,959  per  mile 

Increase  in  same  1 900-1 906. 
$3,701,646,618-5-26,272  (miles  acquired)  =»  4140,897  per  mile 

Increased  stocks,  bonds  and  miscellaneous 

obligations  third  period  overfirst  ( U.S. 

S.  Rys.) $69,609  per  mile 

Same,  third  period  over  second 43,040    "       " 

Same,  according  to  Poor,  third  period  over 

first 79,554   "      " 

Same  according  to  Poor,  third  period  over 

second 75»938    "      " 

5. — The  last  and,  in  my  opinion,  the  least 
objectionable  method  of  arriving  at  the  conclusion 
which  we  are  now  seeking,  is  to  divide  the  gross 
liabilities  at  different  periods  by  the  mileage. 
It  may  very  well  be  said  that  gross  liabilities  are 
no  just  and  fair  criterion  by  which  to  judge  the 
cost  or  value  of  a  business,  that  there  may  be 
valuable  assets  offsetting  these,  and  that  they 
must  be  taken  into  account.  But  the  answer  to 
this  argument  is  that  I  am  not  endeavoring  to 
arrive  at  the  actual  cost  of  building  railways, 
but  am  merely  assuming,  for  the  present,  that 
railway  facilities  are,  as  they  should  be,  practically 
the  only  asset  of  railways,  excepting,  of  course, 
what  may  be  called  their  working  capital.  What 
other  assets,  if  any,  they  have  will  be  considered 
later.  At  any  rate,  it  is  perfectly  legitimate 
to  compare  the  increase  of  facilities  and  gross 


Wrong  in  Our  Transportation  System  81 

be  a  very  ancient  individual.  Moreover  whenever 
a  railway  bonded  debt  is  refunded,  the  process  nat- 
urally raises  two  bonds  where  but  one  grew  before. 
Therefore,  while  I  readily  concede  that,  as  a  mat- 
ter of  book-keeping,  the  railways  have  not  by 
buying  each  other's  securities,  increased  their 
apparent  liabilities;  yet,  as  a  matter  of  railway 
financing,  I  am  equally  certain  that  every  pur- 
chase of  the  securities  of  one  company  by  another, 
increases  the  liabilities  of  the  railway  system  for 
which  the  public  must  stand  sponsor.  This  is 
so  from  the  simple  fact,  that  every  railway  stock 
and  bond  liability  is  practically  an  irredeemable 
liability.  The  railways  could,  if  they  wanted  to, 
sell  the  securities  they  bought  and  retire  the  securi- 
ties they  issued,  but  the  trouble  is,  that  they  never 
had  the  remotest  idea  of  doing  so.  Their  inten- 
tion was  and  is  to  keep  both  of  them  afloat.  If 
by  any  chance  they  should  ever  become  surcharged 
with  money  derived  from  the  sale  of  the  securities 
they  bought,  that  money  will  not  be  used  to  take 
up  or  pay  off  the  new  issue,  but  will  find  itself 
traveling  by  the  shortest  route  into  the  pockets 
of  stockholders  by  way  of  dividends,  while  the 
public  will  hold  the  traditional  sack. 

The  question  is,  therefore,  not  what  might  be 
done,  but  what  will  be  done.  The  railway  cor- 
porations are  every  day  buying  and  selling  each 
other's  securities,  and  the  man  has  yet  to  be  born 
who  ever  heard  of  one  of  them  using  the  money 


82    An  American  Transportation  System 

derived  from  such  a  sale  for  the  purpose  of  paying 
a  bond  or  retiring  a  share  of  stock.  Once  issued, 
these  become  perpetual  liabilities.  However,  lest 
I  be  considered  guilty  of  injustice,  I  hasten  to  add 
that  the  above  process  has  been  modified  by  some 
companies  to  the  extent  that  they  have  used  the 
securities  purchased  as  collateral  security  for  the 
loans  whereby  the  purchase  money  was  raised, 
or  they  hold  the  purchased  securities  in  their 
treasuries  "against"  the  new  securities  they 
issue.  How  this  will  work  out  in  the  final  windup 
remains  to  be  seen,  but,  unless  the  history  of  Amer- 
ican railway  financing  has  come  to  a  conclusion, 
we  may  safely  predict  what  the  end  of  such  trans- 
actions will  be.  There  will  be  a  "General  and 
Consolidated  Refunding  Mortgage"  issued  suffi- 
cient to  cover  both  issues  and  in  this  form  both 
will  be  afloat. 

Need  we  ask  whether  this  purchase  of  securities 
of  one  another  is  economical  transportation  in  its 
financial  aspect?  From  the  standpoint  of  the 
public,  it  is  not  difficult  to  answer.  We  need 
railway  facilities  very  much,  indeed,  and  three 
billion  dollars  would  have  done  much  to  get  them 
for  us,  but  it  may  at  least  be  doubted,  whether 
it  is  economy  to  pay  interest  on  three  billions  of 
railway  located  in  the  skyland  of  high  finance. 
As  a  transportation  facility  it  is  not  very  useful. 

But  is  this  financial  operation  justifiable  from 
a  railway  standpoint?    That  depends  on  whether 


Wrong  in  Our  Transportation  System  83 

you  are  viewing  it  from  the  standpoint  of  a 
number  of  railway  systems,  which  the  people 
and  the  government  have  been  trying  to  sick 
on  to  each  other  like  a  pack  of  fighting  dogs  or 
from  the  standpoint  of  each  individual  railway 
system,  or  from  the  standpoint  of  transportation 
as  a  science.  If  from  the  standpoint  of  warring 
railway  systems — why,  harmony  was  necessary 
at  whatever  cost  to  the  public.  If  from  the 
standpoint  of  each  individual  system — what  mat- 
ters it  to  that  system  how  much  its  debts  are 
increased,  so  long  as  it  gets  securities  of  equal 
value  and  makes  connections  which  bring  it  pay- 
ing business,  or  so  long  as  the  people  can  be  in- 
duced to  pay  rates  returning  an  income  on  the 
increased  capitalization.  Besides,  there  is  the 
Stock  Exchange  ever  to  be  thought  of.  And  to 
bring  a  weak  road  under  the  control  of  a  strong 
road  is  to  boom  the  stocks  of  the  former;  with  a 
plentiful  supply  of  which,  the  manager  has  pro- 
vided himself  in  anticipation  of  the  announced 
change  of  control. 

If  viewed  from  the  standpoint  of  transportation 
as  a  science — but  there  is  no  such  science.  The 
growth  of  such  a  science  has  been  suppressed  by 
the  government,  ignored,  ridiculed  and  trampled 
upon  by  railroad  managers;  whose  only  idea  of 
such  a  science  has  been  and  is  that  it  teaches  them 
how  to  grab  everything  in  sight  and  make  off 
with  it  as  fast  as  they  can.     To  them  the  science 


84    An  American  Transportation  System 

of  transportation  is  the  science  of  getting  business 
for  their  railways,  and  making  their  securities 
attractive  (or  unattractive)  on  the  Stock  Exchange. 

Securities  made  by  resolution  and  printer's  ink 

Thus  we  can  account  for  about  a  billion  and  a 
half  of  the  increased  indebtedness  of  our  railways 
since  1900,  by  this  practice  of  buying  up  securities 
of  other  companies  in  order  to  get  their  control, 
or  a  sufficient  interest  in  them  to  bring  about 
amicable  relations.  This,  as  above  said,  brought 
no  foot  of  railroad  to  the  public.  How  are  we  to 
account  for  the  balance  of  this  increase  of  rail- 
way debt  over  and  above  the  amount  actually 
spent  in  construction  work?  Largely  this  is  to 
be  accounted  for  by  the  ancient  custom  of  just 
"issuing"  it — of  making  railway  securities  by 
resolution  and  printer's  ink. 

I  had  promised  myself  that  I  would  treat  of 
the  railways  of  this  country  as  a  transportation 
system,  and  not  single  out  particular  companies 
as  illustrative  of  either  good  or  bad  practices. 
There  are  but  few  of  them  about  which  much  good 
might  not  be  said,  and,  I  regret  to  say,  but  few 
of  them  that  have  not  indulged  in  practices  bear- 
ing ill  results  to  the  public.  If  it  be  a  principle 
of  transportation  that  railway  capital  should  never 
be  increased,  except  there  be  brought  to  the 
country  a  corresponding  value  in  the  form  of  in- 
creased   transportation    facilities;    then,    which 


Wrong  in  Our  Transportation  System  85 

one  of  our  corporations  has  not  been  guilty? 
Therefore,  when  I  find  that  I  am  compelled  to 
break  my  promise,  and  use  individual  railway 
corporations  as  illustrations  of  practices  which 
seem  to  me  unfair  to  the  public,  I  do  so  with  this 
apology :  that  if  the  records  of  the  best  corporations 
were  examined  they  would  also  most  likely  be 
found  to  be  like  offenders. 

As  a  recent  example  of  how  railway  corpora- 
tions increase  their  debts  (otherwise  euphoniously 
called  their  capital)  by  the  simple  process  of 
resolution  and  printer's  ink,  the  following  facts 
may  be  cited. 

The  Southern  Pacific  Railroad  Co.  is  a  corpora- 
tion which  on  June  30,  1905,  owned  3283  miles 
of  railroad  mostly  in  the  State  of  California.  On 
that  date  it  had  outstanding  stocks  and  bonds  as 
follows: 

Stock  outstanding  June  30,  1905 $128,307,960 

Bonds  "  "       "       "     124,165,500 

Total $252,473,460 

Average  debt  per  mile  $76,880. 

On  June  30,  1906,  this  same  company  owned 
3291  miles  of  railroad,  and  on  that  date  it  had 
outstanding  stocks  and  bonds  as  follows : 

Stock  outstanding  June  30,  1906 $160,000,000 

Bonds  "  "      "       "   124,153,500 

Total $284,153,500 

Average  debt  per  mile  $86,342. 


86    An  American  Transportation  System 

It  will  be  seen  from  this,  that  in  one  year  the 
mileage  of  the  Southern  Pacific  Railroad  Co. 
increased  eight  miles,  while  the  debt  increased 
$31,680,040.  Now  what  was  the  cause  of  this 
great  increase  of  indebtedness  and  small  increase 
of  mileage  in  one  year?  It  will  naturally  be  sup- 
posed that  the  Southern  Pacific  Railroad  Co. 
was  contemplating  some  great  extension  of  its 
railway  facilities,  requiring  an  enormous  increase 
of  capital.  But  this  would  be  a  mistake;  for  we 
find  that  the  next  year  it  had  increased  its  mileage 
exactly  eleven  miles.  Not  a  dollar  of  this  in- 
creased debt  was  represented  by  a  dollar  that  went 
into  the  treasury  of  the  Southern  Pacific  Railroad 
Co.  It  was  just  a  plain  "stock  dividend," 
amounting  to  $31,692,040,  for  which  nobody 
paid  one  dollar, — just  common  "water."1  And 
to  whom  did  the  Southern  Pacific  Railroad  Co. 
give  $31,692,040  of  its  capital  stock?  It  distri- 
buted it  among  its  stockholders  gratis.  And 
who  were  the  stockholders?  The  Southern  Pacific 
Company  owned  every  share  of  the  stock  of  the 
Southern  Pacific  Railroad  Co.  (Poor's  Manual, 
1907,  p.  839). 

So  by  this  simple  trick  of  resolution  and  printer's 
ink,  the  Southern  Pacific  Railroad  Co.  increased 
its  indebtedness  $31,692,040,  and  the    Southern 

1  The  apparent  discrepancy  of  $12,000,  between  the 
amounts  of  increased  debt  and  stock  dividend,  is  explained 
by  the  fact  that  $12,000  of  bonds  went  into  the  sinking 
fund  of  the  Company  in  1906. 


Wrong  in  Our  Transportation  System  87 

Pacific  Company  increased  its  assets  by  a  corre- 
sponding amount.  In  the  succeeding  year  the 
former  company  paid  to  the  latter  company  divi- 
dends at  the  rate  of  4%,  and  this  year  at  the  rate 
of  6%  per  annum,  on  this  absolutely  fictitious  issue 
of  stock.  If  the  Southern  Pacific  Railroad  Co.  did 
not  raise  the  money  to  pay  these  dividends  on 
that  fictitious  issue  of  stock,  by  a  tax  levied  on 
the  American  people,  then  it  got  it  from  some  other 
unwarranted  source.  Will  any  one  pretend  that 
if  this  fictitious  issue  had  not  been  made,  the 
rates  charged  need  have  been  so  high?  It  took 
nearly  $2,000,000  more  to  pay  the  dividends  this 
year  than  would  have  been  required  had  the  spur- 
ious stock  not  been  issued,  and  that  money  had  to 
come  out  of  the  pockets  of  somebody. 

What  will  you  say  of  this  transaction — that 
it  was  just  one  more  stick  piled  on  the  back  of 
the  patient  public  donkey,  and  that  all  he  did 
was  just  to  give  out  one  more  grunt  at  the  ever 
increasing  load?  Was  this  a  legitimate  transac- 
tion? "Yes,"  say  our  railroad  friends.  "The 
railway  was  but  capitalizing  its  increased  earning 
power. "  Then  if  it  was  legitimate,  why  may  not 
this  same  railroad  increase  its  capital  debt  this 
year  by  another  $31,000,000,  and  if  this  year,  why 
not  next  year  and  so  on?  Is  not  the  country 
growing,  and  must  not  its  ever  increasing  growth 
give  ever  increased  earning  power  to  our  railroads  ? 
And  therefore  why  may  not  our  railroads  continue 


88    An  American  Transportation  System 

to  capitalize  the  growth  of  the  country  and  take 
the  profits  of  that  growth  to  themselves  ? 

This  is  one  of  the  processes  by  which  the  railway 
debt  of  the  country  has  increased,  without  a 
corresponding  increase  of  transportation  facilities. 
Is  this  economy  from  the  standpoint  of  the 
country? 

Financing  dummy  companies 

Another  well  known  contrivance  whereby  the 
capitalization  of  our  railway  system  has  been 
overloaded  is  this.  A  company  which  is  strong 
financially  organizes  a  dummy  corporation  to 
build  a  new  road.  The  dummy  corporation 
authorizes  a  bond  issue  sufficient  to  build  the 
road  and  a  stock  issue  of  about  the  same 
amount.  The  strong  company  then  issues  its 
own  securities  to  an  amount  necessary  to 
build  the  new  road,  and  with  the  proceeds  takes 
over  the  bonds  of  the  dummy  company  and 
receives  the  stock  as  a  bonus.  In  this  way  three 
issues  of  securities  appear,  usually  each  for  about 
the  same  amount,  but  only  one  of  them  actually 
brings  railway  facilities  into  being,  that  is,  the 
bonds  of  the  dummy  company.  But  the  public 
pays  interest  on  all  three. 

"But,"  you  say,  "this  was  all  in  the  bad,  bad, 
past — railroad  corporations  do  not  do  such  things 
to-day" — and  many  innocent  souls  are  of  your 
way  of  thinking.     Yet,  as  I  write,  the  ink  is  not 


Wrong  in  Our  Transportation  System  89 

dry  on  a  transaction  of  this  kind,  involving  an 
issue  of  fictitious  securities  amounting  to  over 
$100,000,000.  If  you  will  be  patient,  I  will  tell 
you  the  story,  and,  besides,  it  includes  a  bit  of 
real  American  history. 

Once  upon  a  time,  that  portion  of  North  Amer- 
ica, bounded  on  the  north  by  the  Columbia  River, 
on  the  west  by  the  Pacific  Ocean,  on  the  south  by 
the  Mexican  boundary,  and  on  the  east  by  an 
irregular  line  extending  from  the  state  of  Texas 
northerly  through  Salt  Lake  City  to  the  Columbia 
River,  was  ruled  over  by  a  great  and  good  mon- 
arch, called  King  Collis.  A  mighty  railway  king 
was  Collis,  and,  while  he  lived,  no  other  railway 
king  dared  enter  his  kingdom,  save  by  consent  of 
Collis.  It  is  recorded  history  that  Collis  was  on 
friendly  terms  with  his  neighbors  to  the  east, 
among  whom  was  King  George.  The  way  by 
which  King  Collis  maintained  good  relations  with 
his  fellow  monarchs  to  the  east,  was  by  allowing 
them  to  use  his  railways  to  transport  their  people, 
cattle  and  other  chattels  from  the  boundaries 
of  their  respective  kingdoms  to  the  Pacific  Ocean, 
on  the  basis  of  a  fair  division  of  the  spoils.  But 
none  too  soon,  good  King  Collis  was  laid  to  rest. 

Then  succeeded  the  reign  of  King  Edward. 
He  was  a  greater  king  than  Collis,  and  sought  to  add 
to  the  kingdom  which  Collis  left  him  all  the  rest 
of  the  territory  west  of  the  Missouri  and  Missis- 
sippi rivers.     Historical  gossip  runs  to  the  effect 


90    An  American  Transportation  System 

that  Edward  refused  to  give  to  King  George  as 
fair  a  division  of  the  transportation  swag  as  he 
had  received  during  the  reign  of  King  Collis.  It 
is  also  said  that  at  about  this  time,  King  George 
was  taken  with  an  affliction  of  the  head,  which 
caused  him  to  want  to  own  a  railroad  from  the 
Atlantic  to  the  Pacific  Ocean.  I  shall  not  try  to 
solve  these  nice  historical  points,  it  being  sufficient 
to  say  that,  from  some  cause,  King  George  con- 
cluded to  invade  the  kingdom  of  King  Edward. 
It  is  with  the  cost  of  this  invasion  that  we  are 
especially  concerned. 

As  is  well  known,  the  Denver  &  Rio  Grande 
is  a  railway,  which,  with  its  affiliated  lines,  extends 
from  St.  Louis  to  Salt  Lake  City.  But  it  had  no 
outlet  to  the  Pacific  coast  from  Salt  Lake,  except 
over  the  rails  owned  by  the  Southern  Pacific 
roads.  Naturally,  it  wanted  one  of  its  own, 
so,  in  1903,  it  concluded  to  build  a  road  from  Salt 
Lake  to  San  Francisco.  To  do  this,  it  organized 
a  dummy  corporation,  called  the  Western  Pacific 
Railway  Co.;  and  great  mystery  surrounded  its 
beginnings.  The  length  of  the  new  line  was  to 
be  920  miles. 

In  true  American  railway  style,  this  dummy 
fixed  its  capital  stock  at  $50,000,000,  or  about 
$54,300  per  mile.  Then  it  proceeded  to  bond  its 
road  (to  be)  for  $50,000,000,  or  about  $54,300 
per  mile.  Next,  the  Denver  &  Rio  Grande  and 
its  connections,  entered  into  a  contract  with  its 


Wrong  in  Our  Transportation  System  91 

dummy,  whereby  the  latter  transferred,  first  and 
last,  to  the  treasury  of  the  former  $50,000,000 
of  its  capital  stock  and  $50,000,000  of  its  bonds; 
and  it  was  provided  in  the  agreement  that  if  the 
proceeds  of  the  $50,000,000  of  bonds  should  not 
be  sufficient  to  build  and  equip  the  road,  the 
mother  company  should  buy  from  her  offspring 
sufficient  second  mortgage  bonds  to  complete  the 
road  and  provide  it  with  terminals. 

There  was  here  not  even  a  pretense  that  the  road 
was  to  be  paid  for  otherwise  than  out  of  its  bond 
issue,  nor  that  the  $50,000,000  of  stock  was  any- 
thing but  pure  water.  And,  on  page  542  of 
Poor's  Manual  of  Railroads  for  1908,  you  may 
see,  set  down  under  the  heading  of  "Securities 
owned  by  the  company"  (Denver  &  Rio  Grande) 
"50,000,000  Western  Pacific  Ry.  Co.  common 
stock. " 

But  that  is  not  all.  Since  the  original  issues  were 
made,  additional  issues  of  $25,000,000  of  stock 
and  $20,000,000  second  mortgage  bonds  have 
been  put  out,  making  a  total  of  $145,000,000. 
Nor  is  that  all.  To  provide  the  money  to  buy 
the  $20,000,000  of  second  mortgage  bonds,  the 
Denver  &  Rio  Grande  issued  and  sold  $20,000,000 
of  its  own  bonds,  so  that,  in  order  to  bring  this 
road  into  being,  $165,000,000  of  stock  and  bonds 
have  been  issued. 

Let  us  next  inquire  how  much  money  was 
actually   received   by   the   Western    Pacific   Ry. 


92  An  American  Transportation  System 

from  all  these  issues  and  how  much  was  employed 
in  the  construction  and  equipment  of  the  road. 
The  first  $50,000,000  bond  issue  bears  interest 
at  5%  and  it  was  sold  at  a  discount  of,  at  least, 
10%.  That  takes  off  $5,000,000.  Next,  it  was 
provided  that  interest  for  five  years  should  be 
withheld  by  the  purchasers  of  the  bonds.  That 
takes  off  $12,500,000  more.  In  short,  the  dummy 
company  received  for  its  $50,000,000  of  bonds, 
not  more  than  $32,500,000.  Finally,  for  its 
$20,000,000  of  second  mortgage  bonds  it  received 
$13,125,000,  so  that  the  cash  received  by  the 
dummy  for  its  $145,000,000  of  stocks  and  bonds 
did  not  exceed  $45,625,000  and  was  probably  less. 
Thus  it  appears  that  the  road  cost  to  build  and 
equip  $49,592  a  mile,  it  is  capitalized  at  $159,586 
a  mile,  while  the  total  stock  and  bond  issues  which 
brought  it  into  being  mount  to  nearly  $180,000 
a  mile. 

It  is  extremely  problematical  whether  there 
was  ever  any  justification  for  the  building  of  the 
Western  Pacific.  It  reaches  no  important  points 
not  already  amply  supplied  with  railways,  or 
which  might  not  have  been  supplied  at  a  mini- 
mum of  cost.  But  conceding  that  it  was  neces- 
sary for  the  people  of  this  country  to  have  this 
road,  then,  if  it  could  be  built  for  $45,000,000, 
is  it  anything  less  than  economic  insanity  for 
the  American  people,  in  order  to  get  the  road,  to 
allow  themselves  to  be  loaded  down  with  a  debt 


Wrong  in  Our  Transportation  System  93 

of  $165,000,000  "to  repudiate  which  is  a  national 
dishonour"? 

Note. — I  am  well  aware  that  the  computations  set  forth 
in  this  section,  are  subject  to  the  criticism  that  they  fail  to 
take  into  account  the  amount  of  increased  capital  which  may- 
have  been  devoted  to  the  improvement  of  mileage  already 
in  existence.  This  may  have  been  considerable  but,  so  far 
as  I  am  aware,  no  figures  are  available  showing  what  it  may 
have  amounted  to  in  any  year  or  for  any  period.  However, 
I  do  not  think  it  will  be  seriously  contended  that  the  amount 
so  expended  will  militate  against  the  general  conclusion 
that  railway  debts  have  increased  out  of  all  proportion  to 
the  increase  of  facilities. 

Economic  Waste  from  Dishonesty  of 
Securities 

It  is  not  my  intention  to  prolong  this  list  of 
wasteful  railway  methods  of  financing,  but  to 
proceed  to  the  consideration  of  one  kind  of  loss 
to  the  country  which  has  been,  is  and  will  con- 
tinue to  be,  so  enormous  that  all  the  others  de- 
scribed become  of  relative  unimportance.  I  mean 
the  losses  which  the  country  sustains  by  reason  of 
the  dishonesty,  lack  of  character,  and  instability 
of  American  railway  securities.  I  care  not  what 
else  may  be  said,  this  is  true,  that  American 
railway  securities  should  be  the  most  substantial 
securities  offered  to  any  market  in  this  world. 
As  it  is  they  have  been  smashed  by  every  panic, 
whipped  about  by  every  rumor  and  serve  every 
day  as  the  subject  matter  of  the  manipulation 
of  tricksters.     The  simple  truth  is  that,  from  the 


94  An  American  Transportation  System 

beginning,  American  railway  securities  have  been, 
now  are  and  will  continue  to  be  not  an  invest- 
ment, but  the  chief  means  by  which  the  American 
people  are  forced  to  gamble  and  permit  themselves 
to  be  robbed.  And  this  is  true,  not  because  the 
overwhelming  majority  of  the  American  people 
want  to  gamble,  but  because  the  game  is  forced 
upon  them.  They  buy  what  they  believe  to  be 
good,  only  to  find  that  it  is  rotten. 

There  are  two  or  three  things  that  I  hasten  to 
say  lest  I  be  accused  of  utter  unfairness.  Those 
who  devote  their  special  attention  to  railway 
securities  will  ask:  "Are  they  the  only  securities 
that  are  dishonest,  that  lack  character  and  stabil- 
ity?" And  I  answer:  "By  no  means;  there  are 
billions  of  industrial  securities  just  as  dishonest, 
just  as  lacking  in  character,  just  as  instable  as 
railway  securities."  Others  will  ask:  "Are  rail- 
way securities  the  only  securities  that  are  smashed 
in  panics,  that  are  whipped  about  by  rumors 
and  manipulated  by  rascals?"  And  I  answer: 
"By  no  means;  there  are  billions  of  others  so 
smashed,  so  whipped  and  so  manipulated." 
"Then,"  you  ask,  "why  pick  our  railway  securi- 
ties to  say  hard  things  about?"  And,  I  answer: 
"First,  because  any  number  of  wrongs  do  not 
make  right,  and  second,  because  I  am  specially 
dealing  with  the  economy  of  the  transportation 
industry." 

And  finally,  a  word  about  poor  old  Wall  Street 


Wrong  in  Our  Transportation  System  95 

and  the  Stock  Exchange.  Has  not  the  vocabu- 
lary of  invective  been  exhausted  in  saying  things 
about  them?  I  can  find  nothing  meaner  to  say 
about  them  than  has  been  said  thousands  of 
times,  and  for  the  most  part  by  people  who  have 
but  a  slight  realization  of  the  significance  of  their 
words.  But  to  these  facts  I  call  your  prayerful 
attention.  The  New  York  Stock  Exchange  never 
has  been,  is  not  now,  and  never  will  be,  either 
better  or  worse  than  the  securities  which  are 
therein  bought  and  sold.  It  is  not  the  institution 
which  issues  securities.  It  is  the  great  market 
where  securities  are  bought  and  sold.  It  has  no 
legislative  power.  The  legislative  power  in  this 
country  is  vested  in  congress  and  a  half  hundred 
(more  or  less)  legislatures.  It  ill  becomes  these 
legislative  bodies  and  the  people  who  call  them  into 
being,  to  shift  the  responsibility  for  the  existence 
of  fraudulent,  dishonest,  characterless  and  unsta- 
ble stock  issues,  upon  the  Stock  Exchange.  Again 
I  say,  the  Exchange  is  but  the  market  wherein  the 
stocks  which  the  people  and  the  legislatures  allow 
to  be  issued,  are  dealt  in.  And  mark  this  also: 
the  Exchange  does  not  permit  one-half  the  rotten 
stuff  which  the  people  and  the  legislatures  allow 
to  be  issued,  to  be  traded  on  its  floor.  The 
lawmakers  could  prohibit  the  issuance  of  these 
stocks.  The  Exchange  cannot  prohibit.  It  can 
only  try  to  sift  the  apparently  best,  from  the 
billions   of   trash   the   lawmakers    permit    to    be 


96  An  American  Transportation  System 

manufactured,  and  to  prohibit  the  apparently 
worthless  from  being  bought  and  sold  within  its 
portals. 

And,  now,  confining  ourselves  to  railway 
securities,  let  us  proceed  to  a  rapid  review  of  the 
losses  and  waste  which  have  resulted  from  the 
character  of  railway  securities  and  their  incident 
instability. 

Inherent  dishonesty  in  the  multiplied  diversity  of 
railway  securities 

One  of  the  chief  causes  of  the  dishonesty,  lack 
of  character  and  instability  of  American  railway 
securities,  is  found  in  their  very  multiplicity,  in 
the  lack  of  uniformity,  in  the  great  variety  of 
these  securities  as  a  whole,  and  the  great  variety 
of  securities  which  have  been  issued  by  each 
railway  corporation. 

All  railway  securities  may  be  put  into  one  of 
three  groups:  (i),  stocks,  (2),  bonds,  (3),  other 
obligations. 

Of  stocks  there  are  several  kinds: — common 
stock;  1st  preferred  stock,  cumulative  or  non- 
cumulative;  2nd  preferred  stock,  cumulative  or 
non-cumulative ;  and  guaranteed  stock. 

Of  bonds  there  are  so  many  kinds  that  I  will 
not  try  to  name  them  all : — First  mortgage  bonds, 
second  mortgage  bonds,  third  mortgage  bonds 
and  even  fourth  and  fifth  mortgage  bonds ;  general 
mortgage    bonds,    consolidated    mortgage    bonds 


Wrong  in  Our  Transportation  System  81 

be  a  very  ancient  individual.  Moreover  whenever 
a  railway  bonded  debt  is  refunded,  the  process  nat- 
urally raises  two  bonds  where  but  one  grew  before. 
Therefore,  while  I  readily  concede  that,  as  a  mat- 
ter of  book-keeping,  the  railways  have  not  by 
buying  each  other's  securities,  increased  their 
apparent  liabilities;  yet,  as  a  matter  of  railway 
financing,  I  am  equally  certain  that  every  pur- 
chase of  the  securities  of  one  company  by  another, 
increases  the  liabilities  of  the  railway  system  for 
which  the  public  must  stand  sponsor.  This  is 
so  from  the  simple  fact,  that  every  railway  stock 
and  bond  liability  is  practically  an  irredeemable 
liability.  The  railways  could,  if  they  wanted  to, 
sell  the  securities  they  bought  and  retire  the  securi- 
ties they  issued,  but  the  trouble  is,  that  they  never 
had  the  remotest  idea  of  doing  so.  Their  inten- 
tion was  and  is  to  keep  both  of  them  afloat.  If 
by  any  chance  they  should  ever  become  surcharged 
with  money  derived  from  the  sale  of  the  securities 
they  bought,  that  money  will  not  be  used  to  take 
up  or  pay  off  the  new  issue,  but  will  find  itself 
traveling  by  the  shortest  route  into  the  pockets 
of  stockholders  by  way  of  dividends,  while  the 
public  will  hold  the  traditional  sack. 

The  question  is,  therefore,  not  what  might  be 
done,  but  what  will  be  done.  The  railway  cor- 
porations are  every  day  buying  and  selling  each 
other's  securities,  and  the  man  has  yet  to  be  born 
who  ever  heard  of  one  of  them  using  the  money 


82    An  American  Transportation  System 

derived  from  such  a  sale  for  the  purpose  of  paying 
a  bond  or  retiring  a  share  of  stock.  Once  issued, 
these  become  perpetual  liabilities.  However,  lest 
I  be  considered  guilty  of  injustice,  I  hasten  to  add 
that  the  above  process  has  been  modified  by  some 
companies  to  the  extent  that  they  have  used  the 
securities  purchased  as  collateral  security  for  the 
loans  whereby  the  purchase  money  was  raised, 
or  they  hold  the  purchased  securities  in  their 
treasuries  "against"  the  new  securities  they 
issue.  How  this  will  work  out  in  the  final  windup 
remains  to  be  seen,  but,  unless  the  history  of  Amer- 
ican railway  financing  has  come  to  a  conclusion, 
we  may  safely  predict  what  the  end  of  such  trans- 
actions will  be.  There  will  be  a  "General  and 
Consolidated  Refunding  Mortgage"  issued  suffi- 
cient to  cover  both  issues  and  in  this  form  both 
will  be  afloat. 

Need  we  ask  whether  this  purchase  of  securities 
of  one  another  is  economical  transportation  in  its 
financial  aspect?  From  the  standpoint  of  the 
public,  it  is  not  difficult  to  answer.  We  need 
railway  facilities  very  much,  indeed,  and  three 
billion  dollars  would  have  done  much  to  get  them 
for  us,  but  it  may  at  least  be  doubted,  whether 
it  is  economy  to  pay  interest  on  three  billions  of 
railway  located  in  the  skyland  of  high  finance. 
As  a  transportation  facility  it  is  not  very  useful. 

But  is  this  financial  operation  justifiable  from 
a  railway  standpoint?    That  depends  on  whether 


Wrong  in  Our  Transportation  System  83 

you  are  viewing  it  from  the  standpoint  of  a 
number  of  railway  systems,  which  the  people 
and  the  government  have  been  trying  to  sick 
on  to  each  other  like  a  pack  of  fighting  dogs  or 
from  the  standpoint  of  each  individual  railway 
system,  or  from  the  standpoint  of  transportation 
as  a  science.  If  from  the  standpoint  of  warring 
railway  systems — why,  harmony  was  necessary 
at  whatever  cost  to  the  public.  If  from  the 
standpoint  of  each  individual  system — what  mat- 
ters it  to  that  system  how  much  its  debts  are 
increased,  so  long  as  it  gets  securities  of  equal 
value  and  makes  connections  which  bring  it  pay- 
ing business,  or  so  long  as  the  people  can  be  in- 
duced to  pay  rates  returning  an  income  on  the 
increased  capitalization.  Besides,  there  is  the 
Stock  Exchange  ever  to  be  thought  of.  And  to 
bring  a  weak  road  under  the  control  of  a  strong 
road  is  to  boom  the  stocks  of  the  former;  with  a 
plentiful  supply  of  which,  the  manager  has  pro- 
vided himself  in  anticipation  of  the  announced 
change  of  control. 

If  viewed  from  the  standpoint  of  transportation 
as  a  science — but  there  is  no  such  science.  The 
growth  of  such  a  science  has  been  suppressed  by 
the  government,  ignored,  ridiculed  and  trampled 
upon  by  railroad  managers;  whose  only  idea  of 
such  a  science  has  been  and  is  that  it  teaches  them 
how  to  grab  everything  in  sight  and  make  off 
with  it  as  fast  as  they  can.     To  them  the  science 


84    An  American  Transportation  System 

of  transportation  is  the  science  of  getting  business 
for  their  railways,  and  making  their  securities 
attractive  (or  unattractive)  on  the  Stock  Exchange. 

Securities  made  by  resolution  and  printer's  ink 

Thus  we  can  account  for  about  a  billion  and  a 
half  of  the  increased  indebtedness  of  our  railways 
since  1900,  by  this  practice  of  buying  up  securities 
of  other  companies  in  order  to  get  their  control, 
or  a  sufficient  interest  in  them  to  bring  about 
amicable  relations.  This,  as  above  said,  brought 
no  foot  of  railroad  to  the  public.  How  are  we  to 
account  for  the  balance  of  this  increase  of  rail- 
way debt  over  and  above  the  amount  actually 
spent  in  construction  work?  Largely  this  is  to 
be  accounted  for  by  the  ancient  custom  of  just 
"issuing"  it — of  making  railway  securities  by 
resolution  and  printer's  ink. 

I  had  promised  myself  that  I  would  treat  of 
the  railways  of  this  country  as  a  transportation 
system,  and  not  single  out  particular  companies 
as  illustrative  of  either  good  or  bad  practices. 
There  are  but  few  of  them  about  which  much  good 
might  not  be  said,  and,  I  regret  to  say,  but  few 
of  them  that  have  not  indulged  in  practices  bear- 
ing ill  results  to  the  public.  If  it  be  a  principle 
of  transportation  that  railway  capital  should  never 
be  increased,  except  there  be  brought  to  the 
country  a  corresponding  value  in  the  form  of  in- 
creased   transportation    facilities;    then,    which 


Wrong  in  Our  Transportation  System  85 

one  of  our  corporations  has  not  been  guilty? 
Therefore,  when  I  find  that  I  am  compelled  to 
break  my  promise,  and  use  individual  railway 
corporations  as  illustrations  of  practices  which 
seem  to  me  unfair  to  the  public,  I  do  so  with  this 
apology :  that  if  the  records  of  the  best  corporations 
were  examined  they  would  also  most  likely  be 
found  to  be  like  offenders. 

As  a  recent  example  of  how  railway  corpora- 
tions increase  their  debts  (otherwise  euphoniously 
called  their  capital)  by  the  simple  process  of 
resolution  and  printer's  ink,  the  following  facts 
may  be  cited. 

The  Southern  Pacific  Railroad  Co.  is  a  corpora- 
tion which  on  June  30,  1905,  owned  3283  miles 
of  railroad  mostly  in  the  State  of  California.  On 
that  date  it  had  outstanding  stocks  and  bonds  as 
follows: 

Stock  outstanding  June  30,  1905 $128,307,960 

Bonds  "  "       "       "     124,165,500 

Total $252,473,460 

Average  debt  per  mile  $76,880. 

On  June  30,  1906,  this  same  company  owned 
3291  miles  of  railroad,  and  on  that  date  it  had 
outstanding  stocks  and  bonds  as  follows: 

Stock  outstanding  June  30,  1906 $160,000,000 

Bonds  "      "       "   124,153,500 

Total $284,153,500 

Average  debt  per  mile  $86,342. 


86    An  American  Transportation  System 

It  will  be  seen  from  this,  that  in  one  year  the 
mileage  of  the  Southern  Pacific  Railroad  Co. 
increased  eight  miles,  while  the  debt  increased 
$31,680,040.  Now  what  was  the  cause  of  this 
great  increase  of  indebtedness  and  small  increase 
of  mileage  in  one  year?  It  will  naturally  be  sup- 
posed that  the  Southern  Pacific  Railroad  Co. 
was  contemplating  some  great  extension  of  its 
railway  facilities,  requiring  an  enormous  increase 
of  capital.  But  this  would  be  a  mistake;  for  we 
find  that  the  next  year  it  had  increased  its  mileage 
exactly  eleven  miles.  Not  a  dollar  of  this  in- 
creased debt  was  represented  by  a  dollar  that  went 
into  the  treasury  of  the  Southern  Pacific  Railroad 
Co.  It  was  just  a  plain  "stock  dividend," 
amounting  to  $31,692,040,  for  which  nobody 
paid  one  dollar, — just  common  "water."1  And 
to  whom  did  the  Southern  Pacific  Railroad  Co. 
give  $31,692,040  of  its  capital  stock?  It  distri- 
buted it  among  its  stockholders  gratis.  And 
who  were  the  stockholders  ?  The  Southern  Pacific 
Company  owned  every  share  of  the  stock  of  the 
Southern  Pacific  Railroad  Co.  (Poor's  Manual, 
1907,  p.  839). 

So  by  this  simple  trick  of  resolution  and  printer's 
ink,  the  Southern  Pacific  Railroad  Co.  increased 
its  indebtedness  $31,692,040,  and  the    Southern 

1  The  apparent  discrepancy  of  $12,000,  between  the 
amounts  of  increased  debt  and  stock  dividend,  is  explained 
by  the  fact  that  $12,000  of  bonds  went  into  the  sinking 
fund  of  the  Company  in  1906. 


Wrong  in  Our  Transportation  System  87 

Pacific  Company  increased  its  assets  by  a  corre- 
sponding amount.  In  the  succeeding  year  the 
former  company  paid  to  the  latter  company  divi- 
dends at  the  rate  of  4%,  and  this  year  at  the  rate 
of  6%  per  annum,  on  this  absolutely  fictitious  issue 
of  stock.  If  the  Southern  Pacific  Railroad  Co.  did 
not  raise  the  money  to  pay  these  dividends  on 
that  fictitious  issue  of  stock,  by  a  tax  levied  on 
the  American  people,  then  it  got  it  from  some  other 
unwarranted  source.  Will  any  one  pretend  that 
if  this  fictitious  issue  had  not  been  made,  the 
rates  charged  need  have  been  so  high?  It  took 
nearly  $2,000,000  more  to  pay  the  dividends  this 
year  than  would  have  been  required  had  the  spur- 
ious stock  not  been  issued,  and  that  money  had  to 
come  out  of  the  pockets  of  somebody. 

What  will  you  say  of  this  transaction — that 
it  was  just  one  more  stick  piled  on  the  back  of 
the  patient  public  donkey,  and  that  all  he  did 
was  just  to  give  out  one  more  grunt  at  the  ever 
increasing  load?  Was  this  a  legitimate  transac- 
tion? "Yes,"  say  our  railroad  friends.  "The 
railway  was  but  capitalizing  its  increased  earning 
power."  Then  if  it  was  legitimate,  why  may  not 
this  same  railroad  increase  its  capital  debt  this 
year  by  another  $31,000,000,  and  if  this  year,  why 
not  next  year  and  so  on?  Is  not  the  country 
growing,  and  must  not  its  ever  increasing  growth 
give  ever  increased  earning  power  to  our  railroads  ? 
And  therefore  why  may  not  our  railroads  continue 


88    An  American  Transportation  System 

to  capitalize  the  growth  of  the  country  and  take 
the  profits  of  that  growth  to  themselves  ? 

This  is  one  of  the  processes  by  which  the  railway 
debt  of  the  country  has  increased,  without  a 
corresponding  increase  of  transportation  facilities. 
Is  this  economy  from  the  standpoint  of  the 
country? 

Financing  dummy  companies 

Another  well  known  contrivance  whereby  the 
capitalization  of  our  railway  system  has  been 
overloaded  is  this.  A  company  which  is  strong 
financially  organizes  a  dummy  corporation  to 
build  a  new  road.  The  dummy  corporation 
authorizes  a  bond  issue  sufficient  to  build  the 
road  and  a  stock  issue  of  about  the  same 
amount.  The  strong  company  then  issues  its 
own  securities  to  an  amount  necessary  to 
build  the  new  road,  and  with  the  proceeds  takes 
over  the  bonds  of  the  dummy  company  and 
receives  the  stock  as  a  bonus.  In  this  way  three 
issues  of  securities  appear,  usually  each  for  about 
the  same  amount,  but  only  one  of  them  actually 
brings  railway  facilities  into  being,  that  is,  the 
bonds  of  the  dummy  company.  But  the  public 
pays  interest  on  all  three. 

"But,"  you  say,  "this  was  all  in  the  bad,  bad, 
past — railroad  corporations  do  not  do  such  things 
to-day" — and  many  innocent  souls  are  of  your 
way  of  thinking.     Yet,  as  I  write,  the  ink  is  not 


Wrong  in  Our  Transportation  System  89 

dry  on  a  transaction  of  this  kind,  involving  an 
issue  of  fictitious  securities  amounting  to  over 
$100,000,000.  If  you  will  be  patient,  I  will  tell 
you  the  story,  and,  besides,  it  includes  a  bit  of 
real  American  history. 

Once  upon  a  time,  that  portion  of  North  Amer- 
ica, bounded  on  the  north  by  the  Columbia  River, 
on  the  west  by  the  Pacific  Ocean,  on  the  south  by 
the  Mexican  boundary,  and  on  the  east  by  an 
irregular  line  extending  from  the  state  of  Texas 
northerly  through  Salt  Lake  City  to  the  Columbia 
River,  was  ruled  over  by  a  great  and  good  mon- 
arch, called  King  Collis.  A  mighty  railway  king 
was  Collis,  and,  while  he  lived,  no  other  railway 
king  dared  enter  his  kingdom,  save  by  consent  of 
Collis.  It  is  recorded  history  that  Collis  was  on 
friendly  terms  with  his  neighbors  to  the  east, 
among  whom  was  King  George.  The  way  by 
which  King  Collis  maintained  good  relations  with 
his  fellow  monarchs  to  the  east,  was  by  allowing 
them  to  use  his  railways  to  transport  their  people, 
cattle  and  other  chattels  from  the  boundaries 
of  their  respective  kingdoms  to  the  Pacific  Ocean, 
on  the  basis  of  a  fair  division  of  the  spoils.  But 
none  too  soon,  good  King  Collis  was  laid  to  rest. 

Then  succeeded  the  reign  of  King  Edward. 
He  was  a  greater  king  than  Collis,  and  sought  to  add 
to  the  kingdom  which  Collis  left  him  all  the  rest 
of  the  territory  west  of  the  Missouri  and  Missis- 
sippi rivers.     Historical  gossip  runs  to  the  effect 


90    An  American  Transportation  System 

that  Edward  refused  to  give  to  King  George  as 
fair  a  division  of  the  transportation  swag  as  he 
had  received  during  the  reign  of  King  Collis.  It 
is  also  said  that  at  about  this  time,  King  George 
was  taken  with  an  affliction  of  the  head,  which 
caused  him  to  want  to  own  a  railroad  from  the 
Atlantic  to  the  Pacific  Ocean.  I  shall  not  try  to 
solve  these  nice  historical  points,  it  being  sufficient 
to  say  that,  from  some  cause,  King  George  con- 
cluded to  invade  the  kingdom  of  King  Edward. 
It  is  with  the  cost  of  this  invasion  that  we  are 
especially  concerned. 

As  is  well  known,  the  Denver  &  Rio  Grande 
is  a  railway,  which,  with  its  affiliated  lines,  extends 
from  St.  Louis  to  Salt  Lake  City.  But  it  had  no 
outlet  to  the  Pacific  coast  from  Salt  Lake,  except 
over  the  rails  owned  by  the  Southern  Pacific 
roads.  Naturally,  it  wanted  one  of  its  own, 
so,  in  1903,  it  concluded  to  build  a  road  from  Salt 
Lake  to  San  Francisco.  To  do  this,  it  organized 
a  dummy  corporation,  called  the  Western  Pacific 
Railway  Co.;  and  great  mystery  surrounded  its 
beginnings.  The  length  of  the  new  line  was  to 
be  920  miles. 

In  true  American  railway  style,  this  dummy 
fixed  its  capital  stock  at  $50,000,000,  or  about 
$54,300  per  mile.  Then  it  proceeded  to  bond  its 
road  (to  be)  for  $50,000,000,  or  about  $54,300 
per  mile.  Next,  the  Denver  &  Rio  Grande  and 
its  connections,  entered  into  a  contract  with  its 


Wrong  in  Our  Transportation  System  91 

dummy,  whereby  the  latter  transferred,  first  and 
last,  to  the  treasury  of  the  former  $50,000,000 
of  its  capital  stock  and  $50,000,000  of  its  bonds; 
and  it  was  provided  in  the  agreement  that  if  the 
proceeds  of  the  $50,000,000  of  bonds  should  not 
be  sufficient  to  build  and  equip  the  road,  the 
mother  company  should  buy  from  her  offspring 
sufficient  second  mortgage  bonds  to  complete  the 
road  and  provide  it  with  terminals. 

There  was  here  not  even  a  pretense  that  the  road 
was  to  be  paid  for  otherwise  than  out  of  its  bond 
issue,  nor  that  the  $50,000,000  of  stock  was  any- 
thing but  pure  water.  And,  on  page  542  of 
Poor's  Manual  of  Railroads  for  1908,  you  may 
see,  set  down  under  the  heading  of  "Securities 
owned  by  the  company"  (Denver  &  Rio  Grande) 
"50,000,000  Western  Pacific  Ry.  Co.  common 
stock." 

But  that  is  not  all.  Since  the  original  issues  were 
made,  additional  issues  of  $25,000,000  of  stock 
and  $20,000,000  second  mortgage  bonds  have 
been  put  out,  making  a  total  of  $145,000,000. 
Nor  is  that  all.  To  provide  the  money  to  buy 
the  $20,000,000  of  second  mortgage  bonds,  the 
Denver  &  Rio  Grande  issued  and  sold  $20,000,000 
of  its  own  bonds,  so  that,  in  order  to  bring  this 
road  into  being,  $165,000,000  of  stock  and  bonds 
have  been  issued. 

Let  us  next  inquire  how  much  money  was 
actually   received   by  the   Western    Pacific   Ry. 


92  An  American  Transportation  System 

from  all  these  issues  and  how  much  was  employed 
in  the  construction  and  equipment  of  the  road. 
The  first  $50,000,000  bond  issue  bears  interest 
at  5%  and  it  was  sold  at  a  discount  of,  at  least, 
10%.  That  takes  off  $5,000,000.  Next,  it  was 
provided  that  interest  for  five  years  should  be 
withheld  by  the  purchasers  of  the  bonds.  That 
takes  off  $12,500,000  more.  In  short,  the  dummy 
company  received  for  its  $50,000,000  of  bonds, 
not  more  than  $32,500,000.  Finally,  for  its 
$20,000,000  of  second  mortgage  bonds  it  received 
$13,125,000,  so  that  the  cash  received  by  the 
dummy  for  its  $145,000,000  of  stocks  and  bonds 
did  not  exceed  $45,625,000  and  was  probably  less. 
Thus  it  appears  that  the  road  cost  to  build  and 
equip  $49,592  a  mile,  it  is  capitalized  at  $159,586 
a  mile,  while  the  total  stock  and  bond  issues  which 
brought  it  into  being  mount  to  nearly  $180,000 
a  mile. 

It  is  extremely  problematical  whether  there 
was  ever  any  justification  for  the  building  of  the 
Western  Pacific.  It  reaches  no  important  points 
not  already  amply  supplied  with  railways,  or 
which  might  not  have  been  supplied  at  a  mini- 
mum of  cost.  But  conceding  that  it  was  neces- 
sary for  the  people  of  this  country  to  have  this 
road,  then,  if  it  could  be  built  for  $45,000,000, 
is  it  anything  less  than  economic  insanity  for 
the  American  people,  in  order  to  get  the  road,  to 
allow  themselves  to  be  loaded  down  with  a  debt 


Wrong  in  Our  Transportation  System  93 

of  $165,000,000  "to  repudiate  which  is  a  national 
dishonour"? 

Note. — I  am  well  aware  that  the  computations  set  forth 
in  this  section,  are  subject  to  the  criticism  that  they  fail  to 
take  into  account  the  amount  of  increased  capital  which  may- 
have  been  devoted  to  the  improvement  of  mileage  already 
in  existence.  This  may  have  been  considerable  but,  so  far 
as  I  am  aware,  no  figures  are  available  showing  what  it  may 
have  amounted  to  in  any  year  or  for  any  period.  However, 
I  do  not  think  it  will  be  seriously  contended  that  the  amount 
so  expended  will  militate  against  the  general  conclusion 
that  railway  debts  have  increased  out  of  all  proportion  to 
the  increase  of  facilities. 

Economic  Waste  from  Dishonesty  of 
Securities 

It  is  not  my  intention  to  prolong  this  list  of 
wasteful  railway  methods  of  financing,  but  to 
proceed  to  the  consideration  of  one  kind  of  loss 
to  the  country  which  has  been,  is  and  will  con- 
tinue to  be,  so  enormous  that  all  the  others  de- 
scribed become  of  relative  unimportance.  I  mean 
the  losses  which  the  country  sustains  by  reason  of 
the  dishonesty,  lack  of  character,  and  instability 
of  American  railway  securities.  I  care  not  what 
else  may  be  said,  this  is  true,  that  American 
railway  securities  should  be  the  most  substantial 
securities  offered  to  any  market  in  this  world. 
As  it  is  they  have  been  smashed  by  every  panic, 
whipped  about  by  every  rumor  and  serve  every 
day  as  the  subject  matter  of  the  manipulation 
of  tricksters.     The  simple  truth  is  that,  from  the 


94  An  American  Transportation  System 

beginning,  American  railway  securities  have  been, 
now  are  and  will  continue  to  be  not  an  invest- 
ment, but  the  chief  means  by  which  the  American 
people  are  forced  to  gamble  and  permit  themselves 
to  be  robbed.  And  this  is  true,  not  because  the 
overwhelming  majority  of  the  American  people 
want  to  gamble,  but  because  the  game  is  forced 
upon  them.  They  buy  what  they  believe  to  be 
good,  only  to  find  that  it  is  rotten. 

There  are  two  or  three  things  that  I  hasten  to 
say  lest  I  be  accused  of  utter  unfairness.  Those 
who  devote  their  special  attention  to  railway 
securities  will  ask:  "Are  they  the  only  securities 
that  are  dishonest,  that  lack  character  and  stabil- 
ity?" And  I  answer:  "By  no  means;  there  are 
billions  of  industrial  securities  just  as  dishonest, 
just  as  lacking  in  character,  just  as  instable  as 
railway  securities."  Others  will  ask:  "Are  rail- 
way securities  the  only  securities  that  are  smashed 
in  panics,  that  are  whipped  about  by  rumors 
and  manipulated  by  rascals?"  And  I  answer: 
"By  no  means;  there  are  billions  of  others  so 
smashed,  so  whipped  and  so  manipulated." 
"Then,"  you  ask,  "why  pick  our  railway  securi- 
ties to  say  hard  things  about?"  And,  I  answer: 
"First,  because  any  number  of  wrongs  do  not 
make  right,  and  second,  because  I  am  specially 
dealing  with  the  economy  of  the  transportation 
industry." 

And  finally,  a  word  about  poor  old  Wall  Street 


Wrong  in  Our  Transportation  System  95 

and  the  Stock  Exchange.  Has  not  the  vocabu- 
lary of  invective  been  exhausted  in  saying  things 
about  them?  I  can  find  nothing  meaner  to  say 
about  them  than  has  been  said  thousands  of 
times,  and  for  the  most  part  by  people  who  have 
but  a  slight  realization  of  the  significance  of  their 
words.  But  to  these  facts  I  call  your  prayerful 
attention.  The  New  York  Stock  Exchange  never 
has  been,  is  not  now,  and  never  will  be,  either 
better  or  worse  than  the  securities  which  are 
therein  bought  and  sold.  It  is  not  the  institution 
which  issues  securities.  It  is  the  great  market 
where  securities  are  bought  and  sold.  It  has  no 
legislative  power.  The  legislative  power  in  this 
country  is  vested  in  congress  and  a  half  hundred 
(more  or  less)  legislatures.  It  ill  becomes  these 
legislative  bodies  and  the  people  who  call  them  into 
being,  to  shift  the  responsibility  for  the  existence 
of  fraudulent,  dishonest,  characterless  and  unsta- 
ble stock  issues,  upon  the  Stock  Exchange.  Again 
I  say,  the  Exchange  is  but  the  market  wherein  the 
stocks  which  the  people  and  the  legislatures  allow 
to  be  issued,  are  dealt  in.  And  mark  this  also: 
the  Exchange  does  not  permit  one-half  the  rotten 
stuff  which  the  people  and  the  legislatures  allow 
to  be  issued,  to  be  traded  on  its  floor.  The 
lawmakers  could  prohibit  the  issuance  of  these 
stocks.  The  Exchange  cannot  prohibit.  It  can 
only  try  to  sift  the  apparently  best,  from  the 
billions   of   trash   the    lawmakers    permit    to    be 


96  An  American  Transportation  System 

manufactured,  and  to  prohibit  the  apparently 
worthless  from  being  bought  and  sold  within  its 
portals. 

And,  now,  confining  ourselves  to  railway 
securities,  let  us  proceed  to  a  rapid  review  of  the 
losses  and  waste  which  have  resulted  from  the 
character  of  railway  securities  and  their  incident 
instability. 

Inherent  dishonesty  in  the  multiplied  diversity  0} 
railway  securities 

One  of  the  chief  causes  of  the  dishonesty,  lack 
of  character  and  instability  of  American  railway 
securities,  is  found  in  their  very  multiplicity,  in 
the  lack  of  uniformity,  in  the  great  variety  of 
these  securities  as  a  whole,  and  the  great  variety 
of  securities  which  have  been  issued  by  each 
railway  corporation. 

All  railway  securities  may  be  put  into  one  of 
three  groups:  (1),  stocks,  (2),  bonds,  (3),  other 
obligations. 

Of  stocks  there  are  several  kinds: — common 
stock;  1st  preferred  stock,  cumulative  or  non- 
cumulative;  2nd  preferred  stock,  cumulative  or 
non-cumulative ;  and  guaranteed  stock. 

Of  bonds  there  are  so  many  kinds  that  I  will 
not  try  to  name  them  all : — First  mortgage  bonds, 
second  mortgage  bonds,  third  mortgage  bonds 
and  even  fourth  and  fifth  mortgage  bonds ;  general 
mortgage    bonds,    consolidated    mortgage    bonds 


Wrong  in  Our  Transportation  System  97 

and  general  consolidated  mortgage  bonds;  prior 
lien  bonds  and  general  lien  bonds;  convertible 
bonds  and  convertible  debenture  bonds;  refund- 
ing bonds,  sinking  fund  bonds,  extension  bonds, 
extended  bonds,  construction  bonds,  improve- 
ment bonds,  terminal  bonds ;  consolidated  annuity 
bonds,  irredeemable  bonds,  collateral  trust  bonds, 
serial  bonds,  equipment  bonds  and  debentures; 
first,  second  and  third  income  bonds;  and  so 
many  other  kinds  that  I  have  forgotten  their  very 
names. 

Among  "other  kinds  of  obligations"  may  be 
mentioned,  in  addition  to  current  liabilities,  short 
term  loans,  scrip,  warrants,  and  the  like. 

It  is  far  from  my  intention  to  weary  the  reader 
with  an  attempted  definition  of  these  different 
kinds  of  railway  securities.  It  is  sufficient  for 
my  present  purpose  to  say  that,  for  the  most  part, 
they  are  essentially  American — the  result  of  the 
inventive  genius  of  the  American  railway  finan- 
ciers and  their  lawyers,  whose  capacity  to  supply 
various  names  for  the  same  thing  seems  inexhaust- 
ible. But  disguise  them  under  whatever  names 
we  may,  the  one  patent  fact  which  stares  at  us 
is  this :  across  the  face  of  every  one  of  these  securi- 
ties is  written  the  words  "railway  debt."  And 
this  debt  possesses  one  of  two  characteristics: 
it  is  either  honest  and  therefore  to  be  paid  in 
dividends,  interest  and  principal,  or  else  it  is 
dishonest  and  therefore  liable  to  default  and  dis- 


98  An  American  Transportation  System 

honor.  These  debts  possessed  one  or  the  other 
of  these  characteristics  when  they  were  created, 
when  they  were  floated  and  in  their  current  circu- 
lation now,  they  are  stamped  either  honest  or 
dishonest. 

This  polyglot  of  railway  securities  is  the  im- 
material representation  of  our  material  railway 
system.  It  is  this  jumble  of  securities  which 
passes  current  among  our  people  as  the  value  of 
our  railway  system.  It  is  the  thing  in  which 
some  seventeen  thousand  millions  of  the  savings 
of  the  people  are  invested. 

Wide  variation  in  value  of  different  securities  of 
same  company 

The  first  thing  which  must  occur  to  any  one 
contemplating  this  multifarious  mess  is  this: 
to  what  desperate  straits  our  railway  financiers 
must  have  been  put,  when  they  were  forced  to 
borrow  money  by  every  conceivable  scheme  which 
ingenuity  could  invent.  Why  should  not  every 
honest  dollar  invested  in  our  railways,  have  stood 
upon  an  equal  footing  with  every  other  honest 
dollar?  Why  should  we  have  had  three  or  four 
classes  of  stock,  some  with  preferential  rights 
over  others,  if  each  class  was  represented  by 
equally  honest  dollars  put  into  our  railroads? 
Why  should  our  roads  be  plastered,  two,  three  and 
four  deep,  with  mortgages,  some  of  which  issued 
by  the  same  company  and  upon  the  same  security, 


Wrong  in  Our  Transportation  System  99 

have  but  half  the  value  of  others  ?  Do  these  facts 
point  to  incompetency  on  the  part  of  our  railway 
financiers,  or  to  indifference,  or  to  downright  dis- 
honesty? For,  will  any  one  say  that  our  railways 
have  not  been  and  are  not  now,  good  security 
for  every  honest  dollar  that  they  cost  ?  And  are 
they  not  supported  by  a  carrying  trade  greater 
than  that  of  any  other  system  in  the  world  ?  Why 
then  this  enormous  difference  in  value  between 
the  different  securities  of  the  same  roads? 

Take  the  Rock  Island  System.  Here  is  a 
company  owning  nearly  8000  miles  and  control- 
ling over  6000  miles  more,  of  actual  railroad. 
Not  to  mention  other  important  points,  it  has 
terminals  at  St.  Paul,  Chicago,  St.  Louis,  Kansas 
City,  Denver,  Galveston,  New  Orleans  and 
Birmingham.  It  rests  like  a  gigantic  many  fin- 
gered hand  upon,  and  is  nourished  by,  the  most 
prolific  country  beneath  the  sun — the  great 
Mississippi  Valley.  On  the  first  day  of  July, 
1908,  the  capitalization  of  this  company  was  as 
follows: 

Common  Stock  (Rock  Island  Co.)  $96,000,000 

Preferred     "                                  "  54,000,000 

4%  bonds  (Railroad  Co.)  70,067,700 

5%     "                 "         "  17,364,180 

Total  capital  debt  $237,431,880 

Now  compare  this  capital  debt  with  the  valua- 
tion of  its  securities  on  the  New  York  Stock 
Exchange  on  the  same  day: 


V 


-\4 


ioo  An  American  Transportation  System 


mpar"ct   v— ™» 

Capitaliza- 
tion 

Common  Stock               15  J            $14,448,000 

$96,000,000 

Preferred       "                 27                 14,580,000 

54,000,000 

4%  bonds                        62$              43,892,312 

70,067,700 

5%       "                           60                 10,418,508 

i7.364,i8o 

Total                                              $83,338,820 

$237,431,880 

83,338,820 

Excess  capitalization  over  valuation 

$154,093,060 

I  have  chosen  the  Rock  Island  Co.  for  the  purpose 
of  this  comparison  not,  as  many  might  suppose, 
to  show  its  excessive  capitalization,  but  for  the 
purpose  of  illustrating  the  marked  range  of  values 
between  its  different  classes  of  securities.  And  I 
have  chosen  it  also,  because  the  Rock  Island 
Railroad,  considered  as  a  railroad  and  not  as  a 
financial  operation,  is  one  of  the  best  and  most 
favorably  situated  in  the  United  States.  Why 
should  one  class  of  this  company's  "debts"  be 
selling  at  15I  cents  on  the  dollar,  another  class  at 
27  cents,  another  at  62 1  cents,  and  still  another, 
bearing  a  higher  rate  of  interest,  at  60  cents? 
Will  you  say  that  this  is  because  the  territory  of 
the  Rock  Island  is  not  good  ?  Or  will  you  say  that 
considered  as  a  railroad  it  is  not  good?  No:  you 
will  have  to  lay  it  to  just  one  fact,  the  financing 
method,  the  utterly  uneconomic  and  wasteful, 
not  to  say  dishonest  method,  which  has  character- 
ized our  transportation  system.  All  the  dollars 
which  were  put  into  the  Rock  Island  System  were 
not  equally  honest  dollars.     Some  of  them  were 


Wrong  in  Our  Transportation  System  101 

utterly  forged  and  counterfeit,  others  were  debased 
and  one  has  to  go  back  a  long  way  in  the  history 
of  this  company  to  find  the  actual  honest  gold 
dollars  that  built  the  road.1 

The  point  to  which  I  am  now  directing  attention, 
as  illustrative  of  the  lack  of  character  of  our  rail- 
way securities,  is  the  variation  in  the  value  of  the 
different  classes  of  securities  issued  by  the  same 
company,  not  to  the  variation  in  the  value  of  the 
same  security  at  different  periods.  What  was 
above  said  concerning  the  variation  in  value  of 
the  different  securities  of  the  Rock  Island,  may  be 
said  to  have  characterized  practically  all  the  differ- 
ent railways  at  some  time  in  their  respective 
histories. 

Even  where  at  the  present  time,  there  appears 
a  considerable  uniformity  in  the  value  of  the 
different  securities  of  the  same  road,  you  only  have 
to  go  back  a  sufficient  distance  to  find  the  multi- 
formity complained  of.  Take  for  example  the 
Union  Pacific  Railroad  Co.,  whose  securities  lead 
the  market  to-day.  Only  ten  years  ago  its  com- 
mon stock  was  selling  at  16  cents  on  the  dollar, 
its  preferred  at  45  cents,  and  its  4%  bonds  at  88 
cents.  Even  the  sturdy  old  Pennsylvania  Rail- 
road, which  since  i860  has  never  missed  paying 
a  dividend  each  year,  does  not  escape  the  criti- 

»  In  this  comparison  I  have  assumed  that  the  stock  of  the 
Rock  Island  Co.  represented  the  stock  of  the  Railroad  Co., 
though  the  bonds  above  mentioned  were  the  bonds  of  the 
latter. 


102  An  American  Transportation  System 

cism,  for  no  longer  ago  than  last  June,  its  common 
stock  was  valued  at  120  while  its  4%  bonds  were 
selling  at  103  and  its  4%  "gold  loan"  at  92. 
If  such  may  be  said  of  the  strongest  railway  in 
this  country,  what  may  be  said  of  our  less  strong 
and  really  weak  roads?  Why,  this,  that  their 
different  securities  vary  in  value  from  such  as  are 
merely  nominal  to  such  as  reach  par  value.  Take 
this  list  which  comes  to  me  as  I  write — December 
12,  1908,  in  the  boom  days. 

Name  of  road   Common   ist      2nd  Bonds 

5's-ii5,  4$'s-io6 
3's-78,  3i's~76 

4's-97,  4i's-96 
4*8-98,  4$'s— 103,  5's-ioo 
P.L.4's-89,  Gen'l  4*8-75 
4's-83 

3's-73 

4*s-97 

5's-io7,  4*8-84 

4's-98,    2nd    4's-88,  ref. 

4*8-84 
5's-io3,  4's-79 
4's-ioi 
4's-99 
4's-99 
4's~57 

4's-75.  S's-8s 
4 '8-85,  5's-iio 
ist    4's-92,  2nd     4's-8o 

Con.  4*8-76 
So.  Ry  25         59  Con.    5's-io8,  Gen'l  4's- 

75,  Div.  4*s-88 


Pref. 

Pref. 

Ches.  &  Ohio 

58 

Chi.  &  Alton 

S3 

-  Chi.  &  Gt.  W. 

12 

36 

14 

Colo.  So. 

55 

72 

68 

Denver  &  Rio  G. 

38 

82 

Erie 

35 

49 

40 

K.  C.  F.  S.  &  M. 

74 

Kans.  City  So. 

38 

67 

Long  Island 

5i 

M.  &  S.  L. 

87 

Mo.  K.  &  S. 

38 

7i 

Mo.  Pac. 

65 

N.  Y.  C.  &  S.  L. 

54 

83 

N.  Y.  0.  &  W. 

46 

v^Norf.  &  West. 

84 

86 

^Peoria  &  E.  I. 

28 

Rock  Island 

23 

60 

S.  L.  &  S.  F. 

63 

40 

St.  L.  &  S.  W. 

23 

54 

Wrong  in  Our  Transportation  System  103 

Name  of  Road     Common   ist  2nd  Bonds 

Pref.  Pref. 
Texas  &  Pac.          33  ist  5's-ii4,  2nd  s's-65 

Wabash  18         46  5's-in,2nd  5's-ioo,  deb. 

6's-83,  ref.  4*8-70 
Western  Md.  15  ist  4's-7y,  Gen'l  4*8-56 

Wise.  Cent.  30         68  ist  4*8-83 ,  50  yr.  4*3-89 

After  scanning  this  list  showing  the  enormous 
variation  in  values  of  the  different  classes  of  securi- 
ties of  the  same  road,  will  any  man  possessed  of 
common  honesty,  have  the  hardihood  to  say  that 
in  their  original  issues,  these  different  securities 
were  each  backed  by  the  same  number  of  honest 
dollars,  dollar  for  dollar  of  face  value?  Of  course, 
no  such  man  will  be  found  and  especially  no  rail- 
road man. 

Primary  cause  of  dishonesty  of  railway  securities 

If,  therefore,  you  are  seeking  the  primary  cause 
of  the  dishonesty  of  American  railway  securities, 
you  will  find  it  exactly  in  the  multifarious  charac- 
ter of  these  securities.  If  the  law  had  provided 
that  but  one  uniform  kind  of  security  could  ever 
have  been  issued,  and  that  that  security  should 
be  represented  in  the  treasury  of  the  corporation 
by  honest  dollars  paid  to  it,  ninety  per  cent,  of  the 
evils  of  our  railway  system  and  of  stock  gambling 
would  never  have  been  born.  Therefore,  honest 
people,  cease  lashing  Wall  Street  and  the  Stock 
Exchange,  and  rather  lash  your  own  backs,  for  you, 


104  An  American  Transportation  System 

the  sovereign  lawmakers  of  this  country,  have 
permitted  these  evils  to  exist  and  grow. 

But,  you  will  say,  we  would  never  have  had  our 
railway  systems,  if  we  had  not  permitted  this  sort 
of  financiering;  that  is,  if  we  had  not  permitted 
the  corporations  to  issue  different  classes  and 
grades  of  securities.  You  say,  it  was  necessary 
to  do  this,  in  order  to  induce  capital  to  invest 
in  the  construction  of  railways :  the  hope  of  large 
profits  had  to  be  held  out  to  induce  investments, 
and  this  hope  was  realized  most  largely  by  allow- 
ing the  promoters  to  take  to  themselves  the  securi- 
ties which  cost  them  little  or  nothing.  Say  this 
is  so:  what  then?  Will  you  say  that  during  the 
past  fifty  years  in  this  country,  a  railroad  has  been 
honestly  built  where  it  was  needed,  which  did  not 
possess  within  itself  the  inherent  capacity  to  earn 
a  fair  return  upon  its  honest  cost? 

And  there  you  may  see  the  other  side  of  the 
railroad  shield.  During  these  fifty  years  you, 
the  people,  have  stood  in  constant  antagonism 
to  your  railways.  You  have  been  forever  ham- 
mering, hammering,  hammering  them,  to  bring 
about  rate  reductions.  Blind  to  the  load  of  dis- 
honest stock  and  bond  debt  which  was  being 
heaped  upon  you,  fearful  to  touch  that  matter 
lest  you  discourage  railway  building,  on  the  con- 
trary encouraging  and  crying  for  more  competitive 
roads  by  whatever  means  brought  into  being, 
you  thought    to   relieve   yourselves  of   all  rail- 


Wrong  in  Our  Transportation  System  105 

way  wrongs  by  the  process  of  curtailing  railway 
earnings. 

You  were  oblivious  to  the  fact  that  honest  money 
invested  in  railways,  was  entitled  to  a  guaranty 
from  the  people  that  it  would  be  allowed  to  earn 
an  honest  return  commensurate  with  other  enter- 
prises. This  guaranty  you  refused  from  the  begin- 
ning to  give,  with  the  result  that  those  who  have 
been  most  instrumental  in  bringing  our  railway 
systems  into  being,  have  sought  their  profits  in 
dishonest  issues  of  securities.  The  railway  as  a 
profit  earning  industry,  has  been  subordinated 
to  the  railway  as  a  speculative  and  gambling 
financial  operation.  The  promoter  early  found 
that  he  could  make  ten  dollars  out  of  you  by  gam- 
bling in  railway  securities,  easier  than  he  could 
make  one  dollar  out  of  railway  earnings. 

Had  you,  the  people,  from  the  commencement 
of  the  railroad  era,  provided  by  uniform  laws,  that 
railway  capitalization  should  not  exceed  the  cost 
of  railway  facilities;  that  invested  capital  should 
be  represented  by  but  one  uniform  kind  of  stock; 
that  no  unneeded  road  should  be  built  and  that 
railroads  should  be  allowed  to  earn  incomes  on 
invested  capital  commensurate  with  that  in  other 
industries;  you  would  not  now  be  cursed  with  this 
multifarious  and  malodorous  mess  of  railway 
securities,  and  never  a  railroad  in  this  country 
would  have  known  the  bankruptcy  court.  Where- 
ever  a  railway  has  failed  in  the  United  States, 


106  An  American  Transportation  System 

you  may  rest  assured  it  has  come  from  one  of 
three  causes : — 

i. — It  was  not  needed,  or 

2. — It  was  not  honestly  made  or  capitalized  or 

3. — It  was  not  allowed  to  earn  enough  to  sup- 
port it. 

From  the  violation  of  these  three  fundamental 
principles,  which  show  their  obverse  sides  in  reck- 
less competitive  building  and  operation,  in  dis- 
honest multifarious  securities  and  in  refusal  to 
allow  earnings  sufficient  for  support,  came  the 
dreadful  losses  which  the  people  have  sustained 
by  reason  of  the  instability  of  railway  securities. 

The   Instability  of    Railway  Securities 

In  1907  a  book  entitled  American  Railways  as 
Investments,  by  Carl  Snyder,  appeared.  It  is  by 
all  odds  the  most  valuable  work  of  the  kind  that 
has  ever  been  published,  and  I  would  it  were  in 
the  hands  of  all  who  are  interested  in  this  subject. 
By  permission  I  make  the  following  quotation 
from  his  work,  adding  in  italics  a  sixth  column 
of  low  prices  since  his  book  was  published. 

These  securities,  and  especially  the  railway  stocks, 
it  is  well  known,  are  subject  to  very  wide  fluctuations 
in  value.  This  may  amount  in  the  aggregate  to  a 
perfectly  enormous  sum.  Thus  from  the  highest 
point  in  1902  to  the  low  point  of  1903-4,  the  average 


Wrong  in  Our  Transportation  System  107 

fall  in  railway  shares  was  30%.  The  rise  from  the 
low  point  of  1903-4  to  the  high  point  of  1905-6  was 
over  50%. 

Nor  were  these  enormous  fluctuations  confined  to 
the  weaker  class  of  stocks.  Below  is  a  list  of  a  dozen 
standard  railway  stocks  showing  their  extreme  range 
in  price  through  seven  years: 

Low    High     Low       High    Low      Low 
1900    1902    1903-4  1905-6   Mch.  Since 

'07 

N.  Y.  &  New  Hav. .  207  255  185  216  173  127 

N.  Y.  Cent 125  168  112  167  112    8g 

Pennsylvania 124  170  no  148  114  103 

Reading 15  78  37  164  91    70 

Lackawanna 171  297  230  560  445 

C.  &  N.  W 150  271  153  249  *i38  126 

St.  Paul 108  198  133  199  *i23    93  S 

Ills.  Cent no  173  125  184  134  116     y 

Louis.  &  Nash 68  159  95  157  108    85    v/ 

Atchison 18  96  54  no  83    66    » 

Union  Pac 44  33  65  195  120  100 

Gr.  Northern 144  207  160  348  *i26  107 

Average      107   191   121   224   147 

*  Ex.  valuable  "rights." 

It  will  be  seen  that  this  dozen  standard  securities 
rose  in  two  years  from  an  average  value  of  $107  per 
share  to  $191  per  share,  then  declined  within  a  year 
to  an  average  of  $121  per  share,  then  rose  again  in 
eighteen  months  to  almost  double  this  figure,  and  fell 
in  1907  to  an  average  of  $147  per  share. 

The  peculiar  fact  about  this  enormous  change  in 
values  was  that  it  had  little  to  do  with  the  actual 
earnings  or  the  conditions  of  the  railways  themselves. 


K» 


108  An  American  Transportation  System 

Throughout  this  entire  period  there  was  practically 
no  decrease  in  railway  earnings,  nor  in  railway  profits; 
on  the  contrary,  each  year  of  this  period  proved  either 
equal  to  the  preceding  year,  or  showed  a  handsome 
increase. 

Now  the  remarkable  and  all-important  inference 
from  these  facts  is:  that  while  transportation  as  a 
physical  operation,  remained  constant  as  the  north 
star,  transportation  as  a  financial  operation,  was 
oscillating  like  the  waves  of  the  ocean.  The 
physical  thing  itself  was  stable;  that  which  repre- 
sented the  physical  thing  was  utterly  unstable. 
Apparently  there  was  no  definite  relation  between 
the  thing — the  railway,  and  the  representative  of 
the  tning  in  the  financial  world — the  securities 
of  the  railway. 

This  lack  of  definite  relationship  bears  its  due 
share  of  responsibility  for  two  great  wrongs,  the 
constant  drainage  of  wealth  from  the  masses,  and 
the  constant  and  ever  increasing  accumulation  of 
wealth  in  the  hands  of  the  few;  in  short,  the  un- 
equal distribution  of  wealth  in  the  United  States. 

Nor  need  we  attribute  these  enormous  fluctua- 
tions to  the  manipulation  of  securities.  It  is  not 
necessary  to  manipulate  them.  From  their  very 
character,  they  manipulate  themselves.  But 
whether  securities  are  manipulated  by  tricksters, 
or  whether  these  great  and  minor  oscillations  are 
due  to  the  inherent  instability  of  the  securities 
themselves,  upon  the  whole  and  in  the  end    the 


Wrong  in  Our  Transportation  System  109 

fact  is,  that  the  current  of  accumulation  sets  con- 
stantly toward  the  rich.  They,  from  their  greater 
financial  ability;  their  command  of  the  necessary 
money,  and,  above  all,  from  their  possession  of 
facts  not  available  to  the  great  multitude  of 
dealers  in  railway  securities,  are  able  to  take 
advantage  of  the  market  fluctuations.  I  do  not 
doubt  that  there  is  much  justification  for  the 
often  heard  remark,  that  the  "insiders"  regularly 
feed  securities  to  the  public  when  they  are  high 
and  buy  them  back  again  when  they  are  depressed 
below  their  actual  values. 

The  twelve  corporations  referred  to  by  Mr. 
Snyder,  had  an  aggregate  stock  capitalization  of 
about  $1,900,000,000,  divided  into  about  19,000- 
000  shares  of  the  par  value  of  $100  per  share. 
If  you  put  the  fluctuations  which  took  place  in 
these  shares  during  this  period  alone,  into  figures 
you  will  find  them  to  be  as  follows: 

Rise  in  two  years $1,596,000,000 

Fall  in  one  year 1,330,000,000 

Rise  in  18  months 1,957,000,000 

Fall  in  one  year 1,463,000,000 

If,  now,  you  take  into  consideration  the  well 
known  psychological  fact,  that  customarily  the 
foolish  and  ill-advised  multitude  buy  and  the 
clever,  shrewd,  and  knowing  few  sell,  when  stocks 
are  at  their  height,  and  that  the  reverse  of  this 
operation  takes  place  when  stocks  are  low;  you 
will  have  little  reason  to  wonder  why  we  are 


no  An  American  Transportation  System 

approaching  the  era  of  billionaire  plutocracy.  It 
is  not  that  they  are  makers  of  wealth,  but  that 
they  are  simply  receivers  of  wealth.  The  current 
of  savings  flows  with  a  mighty  but  steady  stream, 
from  the  hands  of  the  multitude  to  the  vaults  of 
the  few. 

Yes,  if  I  belonged  to  the  latter  class,  I  would 
pray  that  history  might  continue  to  repeat  itself. 
As  it  is,  I  am  fighting  my  little  fight  in  the  hope 
that  the  American  people  may  some  day  see  that 
the  only  chance  for  their  savings  lies  in  the  estab- 
lishment of  stability  in  their  investments.  If,  for 
instance,  railways  were  permitted  to  earn  a  cer- 
tain fixed  percentage  on  their  capital,  and  this 
certain  fixed  percentage  should  be  regularly  dis- 
tributed among  the  holders  of  their  securities,  I 
fail  to  see  how  all  the  forces  that  play  upon 
markets  could  greatly  influence  the  value  of  such 
securities.     But  of  this,  more  hereafter. 

At  present,  I  call  your  attention  to  this  fact. 
In  the  twelve  months  ending  June  30,  1907,  the 
total  railway  transportation  system  of  the  United 
States  cost  the  people  in  round  numbers  two 
billions  six  hundred  millions  of  dollars.  That 
was  the  amount  the  railways  received  in  freights 
and  fares.  But  in  a  like  period  of  twelve  months, 
railway  securities  declined  in  selling  value  an 
average  of  more  than  thirty  per  cent,  estimated 
at  about  five  billions  of  dollars.  Thus  you  will 
see  that  the  decline  in  the  value  of  railway  securi- 


Wrong  in  Our  Transportation  System  in 

ties  was  nearly  twice  as  much  as  the  total  cost 
of  carrying  on  the  entire  system  for  a  like  period. 
Yet  during  this  period  the  railway  as  a  material, 
physical  fact,  did  not  change  in  the  least,  except 
to  extend  itself  about  five  thousand  miles. 

Far  be  it  from  me  to  intimate  that  this  decline 
of  five  billions  represented  an  actual  loss  of  that 
amount.  But  minimizing  it  as  we  may,  the  im- 
portant fact  remains,  that  the  loss  was  enormous. 
At  this  writing  the  loss  has  been  largely  made  up, 
only  to  begin  the  process  of  repeating  itself. 
But  who  will  even  know  the  tens  of  thousands 
of  people  who  were  compelled  to  sacrifice  their 
securities  during  that  period  of  depression  and 
panic  ?  Who  will  ever  be  able  to  tell  the  mighty 
ramifications  of  those  losses,  of  financial  institu- 
tions which  failed,  or  had  their  margins  of 
safety  cut  to  the  quick,  of  merchants  who 
suffered  insolvency  because  their  bankers  were 
unable  to  aid,  of  industrial  enterprises  which 
suspended,  of  hundreds  of  thousands  of  laborers 
thrown  out  of  employment,  of  the  careful  pro- 
vision of  old  age  lost  or  imperiled  and  of  rail- 
ways themselves  forced  into  bankruptcy  or  barely 
keeping  out  of  it  ? 

Of  course,  it  would  be  at  once  childish  and 
unjust  to  charge  our  late  panic  entirely  to  the 
dishonest  and  unstable  character  of  railway 
securities.  Yet,  if,  as  I  believe,  all  panics  are 
caused  by  laying  upon  industries  greater  credit 


ii2  An  American  Transportation  System 

burdens  than  they  can  carry,  then  the  railways 
must  bear  their  just  share  of  the  blame,  for  no 
other  industry  has  been  so  great  an  offender. 

Now,  if  you  will  cast  your  retrospective  eye 
over  the  past  fifty  years  of  our  railroad  history, 
you  will  see  that  in  addition  to  innumerable 
minor  oscillations,  there  have  been  twelve,  so  to 
speak,  earthquakes  and  three  violent  eruptions 
in  railway  securities.  In  each  of  these  the  values 
of  the  railway  securities  have  been  shaken,  and 
in  the  greater  ones  the  very  foundations  have 
almost  gone  from  under  them.  I  speak  not  of 
the  effects  of  these  upon  professional  stock  gam- 
blers, in  whom  interest  is  lacking;  but  of  their 
effects  upon  millions  of  honest  people  who  had 
invested  their  savings  in  railway  securities,  think- 
ing them  good  and  honest  only  to  find  themselves 
time  after  time,  victims  of  the  same  delusion. 
Verily,  for  the  last  fifty  years,  railway  securities 
have  been  a  mighty  sponge  perennially  soaking  up 
the  savings  of  the  people,  and  when  they  were 
squeezed  out,  vast  amounts  of  these  savings  were 
washed  away  unto  the  limitless  ocean  of  industrial 
waste,  or  into  the  bulging  reservoirs  of  the  rich. 

The  only  answer  to  all  this  is  the  shrug  one 
often  sees,  accompanied  by  the  remark:  "The 
fools  should  have  had  more  sense  than  to  have 
invested  in  railway  securities."  Probably:  yet 
the  far  reaching  effect  of  this  attitude  is  over- 
looked.    It  not  only  implies  the  utter  dishonesty 


Wrong  in  Our  Transportation  System  1 13 

of  the  financial  methods  of  railway  corporations; 
it  puts  the  stamp  of  shame  upon  the  American 
people  as  deliberate  tolerators  of  dishonest  cor- 
porate management;  it  implies  the  singular  lack 
of  care  which  our  government  has  for  its  citizens, 
in  permitting  the  greatest  available  investment 
to  be  of  such  character  and  it  offers  but  scant 
encouragement  to  the  public  to  come  forward 
with  further  loans  to  carry  out  improvements 
and  extensions  now  urgently  demanded. 

Thus,  I  trust,  it  has  become  fairly  clear  that 
the  question :  "Is  our  railway  system  economic  ? ' ' 
assumes  a  much  wider  scope  than  the  question, 
"Are  railway  rates  reasonable?"  The  problem  as 
it  presents  itself  to  me,  is  nearly  coextensive  with 
transportation  in  all  its  relations  and  aspects. 
It  is  essentially  a  problem  of  national  economy, 
or,  putting  it  otherwise,  of  national  economic 
waste.  It  involves,  on  the  one  hand  the  freedom 
of  those  who  travel  from  exposure  to  unnecessary 
hazards,  and  on  the  other  hand  the  loss  of  national 
efficiency  from  the  unnecessary  maiming  of  over 
one  hundred  thousand  persons  a  year.  It  involves 
the  provision  of  the  necessary  transportation 
facilities  to  expeditiously  take  care  of  the  traffic 
of  this  country  at  all  times.  It  involves,  likewise, 
the  honesty  of  the  capitalization  of  corporations 
engaged  in  transportation,  the  stability  of  invest- 
ments and,  in  a  large  measure,  the  very  honor  of 
the  nation  itself. 


ii4  An  American  Transportation  System 

Is  Our  Railway  System  an  Impartial  Servant 
of  All  Persons  and  All  Places  ? 

This  I  take  to  be  an  axiom  of  transportation: 
that  it  sells  its  service  to  all  who  require  it  with 
blind  impartiality.  Out  of  the  violation  of  this 
self-evident  principle  of  railway  justice,  three 
great  abuses  have  grown.  But  he  who  is  a  corn- 
plainer  only  of  railway  wrong,  will  do  well  to 
dilute  his  complaint  with  a  fair  statement  of  the 
conditions  under  which  the  railway  came  into 
existence  and  has  grown.  I  find  little  that  may 
be  offered  in  extenuation  of  the  financial  methods 
of  railway  managers,  but  there  is  scarcely  any 
other  wrong  with  which  the  railway  has  been 
charged,  for  which  some  excuse  may  not  be  found 
in  the  conditions  which  attended  its  development. 

So  accustomed  are  we  to  think  of  the  railway 
as  a  fixed  and  finished  industrial  institution,  we 
overlook  the  fact,  that,  relative  to  many  other 
of  the  industries  of  man,  it  is  a  very  youth.  In 
1830  there  were  but  twenty -three  miles  of  railway 
in  operation  in  all  the  United  States.  In  three- 
quarters  of  a  century  it  has  become  the  very 
lord  of  transportation. 

At  the  very  first  this  infant  announced  his 
mission:  "  I  have  come  to  carry  the  people  of  this 
world  and  their  goods.  Before  me  all  others  who 
have  served  man  in  this  capacity  since  history 
was  born,  shall    bow."      And  one    by    one    all 


Wrong  in  Our  Transportation  System  115 

others  have  acknowledged  his  supremacy  or  paid 
him  tribute. 

But  let  it  not  be  imagined  that  this  victory  has 
been  achieved  without  a  struggle.  Every  hour 
since  this  lusty  infant  stuck  his  red  nose  into  this 
battling  world  till  now,  grown  to  young  manhood, 
he  has  had  to  fight.  The  conquest  of  the  dry 
land  was  indeed  easy;  for  here  he  met  no  foe 
more  formidable  than  the  lazy  old  ox  who,  tired 
of  his  job  anyway,  was  willing  to  quit.  But 
wherever  the  youth  came  to  the  open  sea,  or  the 
wide  lakes,  or  the  deep  rivers,  he  met  worthy 
enemies.  Here  lived  those  ancient  warriors  who 
had,  from  time  immemorial,  known  no  enemy. 
The  waters  and  the  winds  were  theirs.  Surely 
this  very  boy  could  not  drive  them  from  their 
native  element. 

First  he  gave  attention  to  those  who  lived  on 
and  by  the  river.  And  he  said  to  the  people  they 
had  been  serving:  "I  can  carry  you  and  your 
goods  faster  than  your  old  servants."  But  the 
river  gods  laughed  and  replied:  "Yes,  boy,  you 
are  fleeter,  but  we  are  cheaper."  "I  will  show 
you,"  said  the  boy.  "You  will  see  me  carrying 
right  along  your  banks."  And  that  the  river 
gods  saw,  and  died. 

Then  the  boy  turned  his  attention  to  the  people 
who  live  by  the  seas  and  the  lakes,  and  he  said  to 
them:  "I  can  carry  you  and  your  goods  faster 
and  safer  than  your  old  servants."     And  the  old 


n6  An  American  Transportation  System 

servants  said :  "  Yes,  but  we  can  carry  cheaper. " 
But  the  land  god  said,  "I  will  show  you."  And 
he  laid  his  rails  around  the  lakes  and  between  the 
ports  anciently  served  by  his  enemy.  And  he 
carried  cheaper  and  cheaper,  and  yet  his  enemy 
did  not  die.  Instead  he  grew  bigger  and  bigger 
and  bigger.  And  the  battle  raged  fiercely,  but 
the  land  god  could  not  conquer  the  water  gods  in 
the  great  waters.  And  the  land  god  was  growing 
weak.  "Where  shall  I  get  food?"  he  cried. 
Then  a  happy  thought  struck  him.  He  said: 
"These  things  that  float  can  only  carry  between 
ports,  while  I  serve  everywhere.  Let  them  carry 
as  cheap  as  they  will  between  ports.  I  will  carry 
cheap  there,  too,  but  if  they  want  anything 
they  carry  taken  away  from  the  ports,  I  will 
charge  more  for  that  service."  And  the  deep 
water  gods  saw  the  point,  and  wherever  the  people 
they  served  wanted  their  goods  sent  into  the 
interior  from  the  ports,  they,  the  water  gods, 
had  to  pay  tribute  to  the  land  god,  and  he  took 
all  he  could. 

But  these  were  not  all  the  wars  the  young  giant 
had  to  fight.  He  had  brothers  and  they,  too, 
demanded  the  right  to  carry.  And  wherever 
these  brothers  had  routes  which  began  at  the 
same  place  and  ended  at  the  same  place,  or  wher- 
ever their  respective  routes  crossed  each  other, 
fierce  struggles  for  mastery  issued.  Seeing  these 
fratricidal  wars  the  cities  and  citizens  were  de- 


Wrong  in  Our  Transportation  System  117 

lighted.  And  the  cities  where  the  wars  were  car- 
ried on  grew  fat,  because  their  goods  were  carried 
for  less  charges  than  were  paid  by  other  cities 
where  there  was  no  war.  Nor  was  that  all. 
Certain  large  and  influential  citizens  went  first 
to  one  brother  and  then  to  another,  slyly  saying: 
"  If  you  will  carry  for  me  more  cheaply  than  you 
do  formyneighbor,I  will  give  you  all  my  business." 
And  each  brother  said  to  himself:  "I  was  born 
to  carry  and  unless  I  carry  I  die."  And  each 
accepted  the  offers  of  the  large  and  influential 
ones,  until  there  was  no  profit  left  to  any  brother. 
But  the  large  and  influential  ones,  they  made 
mighty  gains  for  themselves  out  of  these  wars. 

Out  of  these  struggles  attending  the  growth 
of  our  railway  system,  three  great  wrongs  have 
grown,  and  with  them  the  railways  are,  with 
more  or  less  justice,  charged. 

The  first  of  these  wrongs  is  the  granting  of 
rebates,  or  lesser  rates,  to  certain  shippers  than 
to  others. 

The  second  is  the  granting  of  very  low  rates 
to  the  large  seaboard  and  lake  cities  where  water 
competition  exists  and  like  low  rates  to  cities 
having  inter-railway  competition,with  correspond- 
ing high  rates  to  localities  not  so  favored.  The 
result  of  this  has  been  that  the  railways  were, 
and  yet  are,  compelled  to  make  the  major  portion 
of  their  profits  out  of  the  latter  localities. 

The  third  wrong  is,  that  cheap  inland  water 


n8  An  American  Transportation  System 

transportation  has  been  nearly  killed,  deep  water 
transportation  has  had  its  just  profits  reduced 
more  than  should  be,  and  the  losses  thus  sustained 
have  fallen  as  a  charge  upon  the  interior  of  the 
country. 

All  these  wrongs  have  come  about  from  a 
violation  of  the  fundamental  principle  of  transpor- 
tation,— that  it  serve  impartially.  The  results 
have  been,  in  my  judgment,  disastrous  to  the 
railways  and  harmful  to  shippers  and  industries, 
while  the  burden  of  maintaining  our  railway 
system  has  been  distributed  unjustly  and  un- 
evenly upon  different  parts  of  our  country.  As 
these  subjects  will  recur  when  considering  the  rem- 
edies which  appear  from  legislative  enactments, 
I  leave  them  for  the  present. 

Are   the  Charges  of  Our  Railway  System 
Reasonable  ? 

No  accusation  has  been  brought  against  the 
railway  of  as  great  potency  as  this:  that  no  just 
principle  has  governed  it  in  fixing  the  rates  of 
freights  and  fares  which  it  charged  its  patrons 
for  its  services.  It  has  been  persistently  pro- 
claimed by  individuals,  industries  and  communi- 
ties, that  the  only  principle  upon  which  the  railway 
has  acted  in  making  its  rate-charges,  is  "to  charge 
all  the  traffic  will  bear."  In  other  words,  it  is 
claimed,  that  the  railway  has  forced  all  the  indus- 


Wrong  in  Our  Transportation  System  119 

tries  of  the  country  to  become  its  involuntary 
partners,  with  the  right,  on  its  part,  to  take  the 
major  share  of  the  profits  of  all  business,  leaving 
to  the  producer  just  enough  profits  to  keep  him 
in  business.  This  is  a  very  nasty  view  to  take  of 
the  matter.  If  it  be  the  correct  view,  the  practice 
is  certainly  little  short  of  damnable. 

But  the  primary  fault  of  most  men  is  this: 
they  are  so  selfish  themselves,  that  nothing  will 
satisfy  them  except  their  neighbor  acts  from 
motives  of  pure  philanthropy.  They  overlook 
the  fact  that  every  man,  be  he  laborer,  farmer, 
merchant,  manufacturer  or  preacher,  sells  what 
he  has  for  sale  for  the  best  price  he  can  get.  I  do 
not  remember  ever  to  have  heard  of  even  a  divine, 
who  sold  his  horse  for  less  than  he  thought  the 
purchaser  would  pay.  Now  the  railway  is  no 
more  a  philanthropic  institution  than  is  a  hard- 
ware store.  It  is  just  this  much  fairer  than  most 
men  in  their  private  transactions;  it  does  not 
charge  the  last  living  cent  of  profit  which  it  could 
make. 

All  wise  railways — and  there  are  few  which  are 
not  wise  in  this  regard — endeavor  to  so  adjust 
their  charges,  that  they  shall  be  commensurate 
with  the  value  of  their  services  to  the  shipper. 
People  overlook  the  fact  that,  while  railway 
charges  seem  in  many  cases  to  be  extortionate, 
in  many  more  cases  they  are  scarcely  sufficient 
to  pay  the  actual  cost  of  running  the  trains.     It 


120  An  American  Transportation  System 

costs  the  railway  no  more  to  carry  a  car  of  ore 
which  assays  a  thousand  dollars  a  ton,  than  a 
carload  assaying  ten  dollars  a  ton.  Yet  the 
latter  is  carried  at  probably  one-tenth  the  charge 
of  the  former.  This  makes  the  owner  of  the 
thousand  dollar  ore  charge  about  like  an  enraged 
bull.  He  is  unmindful  of  the  fact  that  the  low 
grade  ore  was  carried  with  scarcely  any  profit  to 
the  carrier,  and  that  it  is  the  average  of  charges 
which  at  once  makes  it  possible  for  both  the 
mining  and  the  railway  industries  to  flourish. 
Nor  is  it  true  that — in  the  bad  sense  of  the  phrase 
— the  carrier  charged  " all  the  traffic  could  bear;" 
for  if  it  had,  it  could  have  charged  nine  hundred 
dollars  a  ton  and  still  have  left  a  handsome  margin 
to  the  mine  owner.  Traffic  managers  are  not 
idiots.  If  you  look  at  the  charge  for  carrying 
the  ten  dollar  ore,  you  will  come  more  nearly 
realizing  the  true  meaning  of  this  phrase ;  for  there 
the  charges  were  "no  more  than  the  traffic  could 
bear." 

But  this  phrase  is  but  the  superficial  expression 
of  a  much  deeper  principle  governing  the  railways 
in  making  rates.  The  railway  has  but  one  reason 
for  its  existence.  It  must  carry.  It  must  do 
business.  It  must  turn  the  wheels,  or  rot.  Now, 
it  so  happens  that  the  majority  of  traffic  that 
comes  to  the  railway,  cannot  "bear"  high  charges. 
If  high  charges  were  imposed  upon  it,  such  traffic 
would  not  move  at  all ;  simply  because  at  the  end 


Wrong  in  Our  Transportation  System  121 

of  its  journey  it  would  have  eaten  itself  up  in  the 
charges  of  carriage.  Likewise,  the  comparatively 
small  amount  of  traffic  that  can  "bear"  high 
charges,  is  not  sufficient  to  support  the  railways. 
What,  then,  is  to  be  done?  Let  the  railway 
answer. 

The  railway  says:  "Work  me  to  my  full  capa- 
city some  way.  Give  me  all  the  work  you  can 
at  as  high  price  as  possible.  When  you  have  done 
that,  get  me  more  work  at  the  next  best  price. 
You  see  I  have  plenty  of  strength  left  in  me. 
Get  me  work  that  will  help  to  pay  the  cost  of  my 
keeping.  I  want  more  work  still.  If  there  is 
any  work  left  that  cannot  afford  to  pay  more, 
then,  get  it  for  me  even  though  it  does  not  pay 
more  than  the  cost  of  my  food,  my  clothes  and 
the  oil  that  keeps  my  joints  limber.  I  was  born 
to  serve  and  serve  I  will.  If  you  find  any  industry, 
any  place,  that  cannot  afford  to  pay  much,  put 
its  products  on  my  back  and  I  will  carry  them  to 
the  market,  and  bye  and  bye,  maybe,  it  will  be 
able  to  pay  me  better. " 

Out  of  this  demand  of  the  railway  to  be  worked 
to  its  full  capacity,  there  has  grown  a  perfect  tan- 
gle of  rates.  For  the  old  railway  housekeeper,  the 
traffic  manager,  has  had  to  make  "ends  meet" 
some  way.  He  has  had  to  adjust  this  jumble 
of  rates  to  expenses  in  such  a  way,  that  the  chil- 
dren would  all  be  fed  and  a  snug  surplus  show  up 
at  the  end  of  each  year.     And  in  many  a  lean 


122  An  American  Transportation  System 

year  there  has  been  no  surplus,  and  in  many  a 
year  some  of  the  children  have  gone  hungry, 
and  in  some  years  the  whole  lot  of  them  literally 
starved. 

An  ideal  railway,  as  I  take  it,  is  one  which 
earns  enough  money  to  comfortably  pay  (i),  the 
cost  of  operating  the  road;  (2),  the  cost  of  main- 
taining the  road  in  first  class  shape;  (3),  the 
interest  on  its  debts;  (4),  nice  dividends  to  its 
stockholders  and  (5),  have  a  reasonably  fat  sur- 
plus, sufficient  to  cover  all  contingencies.  If 
one  were  to  be  asked  which  of  these  desirable 
conditions  could  be  dispensed  with  and  a  railroad 
still  be  left,  he  would  readily  say:  "A  railway 
could  get  along  some  way  without  a  surplus;  it 
could  reply  to  its  stockholders  that,  while  no 
dividends  had  been  earned,  it  was  still  operating; 
if  default  was  made  in  the  bonds,  the  road  would 
go  into  a  receiver's  hands,  but  still  be  a  railroad. 
But  if  the  road  was  not  maintained,  the  winds 
and  the  rain  and  the  worms  and  the  rust  would 
soon  destroy  its  capacity  to  be  operated,  and  when 
it  is  no  longer  operated  it  is  dead. " 

Hence  it  is  that  whether  a  railroad  earns  much 
or  little,  its  maintenance  is  a  fixed  charge  and  its 
operating  expenses  cannot  be  reduced  below  a 
certain  minimum.  It  therefore  follows  that  it  is 
better  to  do  business  at  rates  which  will  pay  inter- 
est on  bonds  and  these  absolutely  necessary 
charges,  than  it  is  not  to  do  business  at  all;  for 


Wrong  in  Our  Transportation  System  123 

the  railway  plant  is  there,  and,  unless  it  be  main- 
tained and  operated,  it  is  of  less  value  than  a 
county  highway.  Hence  it  follows,  that  any 
freight  which  may  be  carried  at  any  rate  which 
will  help  contribute  to  the  payment  of  these  abso- 
lutely necessary  costs,  is  considered  freight  that 
it  pays  the  railway  to  handle. 

This  system  of  rate-making  is  the  outgrowth 
and  result  of  upwards  of  fifty  years  of  practical 
experience  in  conducting  railway  transportation. 
Naturally  it  is  complicated.  And  if  to  its  inhe- 
rent complexity,  there  be  added  the  complications 
arising  from  the  conditions  attendant  upon  the 
growth  of  the  railway,  as  set  forth  in  the  last 
section, — railway  competition  with  water  trans- 
portation, inter-railway  competition,  the  continu- 
ous, everlasting  demands  of  influential  shippers, 
of  cities  and  localities,  for  special  privileges  and 
preferences;  it  is  not  difficult  to  see  that  railway 
rates  have  become  a  terribly  tangled  skein,  with 
no  better  defined  principle  running  through  it 
than,  that  each  kind  of  freight  should  be  charged 
according  to  its  capacity  to  bear  the  burden  of 
sustaining  and  maintaining  our  transportation 
system. 

Whether  this  principle  could  be  improved  upon, 
if  every  form  of  railway  preference  were  abolished 
and  if  all  our  railways  were  consolidated  into  a 
transportation  system,  remains  to  be  considered. 

Meantime,  it  appears  to  me  that  there  are  two 


124  An  American  Transportation  System 

deductions  which  one  is  entitled  to  make  from  the 
system  of  rate-making  which  has  grown  up.  The 
first  is :  that  the  cost  to  the  railway  of  the  partic- 
ular service  rendered,  has  had — and  should  have 
had — only  a  feeble  influence  upon  the  rate  charged. 
Of  course,  no  railway  should  ever  perform  any 
service  for  less  than  cost,  but  above  that,  any 
charge  which  brought  revenue  to  the  road  was 
justifiable.  The  second  deduction  is :  that  there 
is  no  such  thing  as  inherent  reasonableness  in  a 
railway  rate,  and  that  we  have  neither  basis  nor 
data  on  or  from  which  to  determine  whether  the 
aggregate  of  charges  collected  by  the  railways  is 
reasonable  and  just. 

The  first  of  these  deductions  seems  to  me  ob- 
vious, but  the  second  requires  more  extended 
examination,  involving  as  it  does  the  wider 
problem ;  whether,  as  between  the  people  and  their 
railways,  the  latter  receive  a  fair  return  for  the 
services  rendered  the  former. 

Does  Our  Railway  System  Receive  a  Fair 
Return    and    only    a   Fair   Return    on 
its  Honest  Investment? 

Since  the  railway  is  a  national  necessity,  I  take 
this  to  be  the  fundamental  principle  governing 
the  relation  between  the  nation  and  its  railway 
system,  to  wit :  that  it  is  as  much  the  duty  of  the 
nation  to  see  that  the  railway  receives  a  fair  return, 


Wrong  in  Our  Transportation  System  125 

as  it  is  to  see  that  it  receives  only  a  fair  return 
upon  its  honest  investment.  For  this  honest  in- 
vestment is  employed  primarily  for  the  use  and 
benefit  of  the  nation.  And  he  is  surely  a  short 
sighted  farmer  who  starves  the  horses  that  work 
his  farm. 

But  who  is  there  who  is  wise  enough  to  answer 
the  question  which  heads  this  section  ?  Certainly 
not  I.  For  I  do  not  know  what  the  "honest 
investment"  is,  which  is  to  receive  a  fair  and  only 
a  fair  return.  The  second  premise  is  missing. 
And,  therefore,  the  conclusion  is  unattainable. 
This  will  be  obvious  if  you  throw  the  problem 
into  the  customary  form. 

The  railway  is  entitled  to  a  fair  return  on  its 
honest  investment. 

Its  honest  investment  is — ■ — 

Therefore  the  fair  return  is 

Now,  since  the  only  legitimate  source  of  revenue 
of  the  railway  is  its  charges  for  carrying  persons 
and  freights,  it  follows  that  there  is  no  way  of 
determining  what  those  charges  should  be,  until 
after  you  know  what  rightful  demands  upon  the 
railway  may  be  made.  You  know  these  fairly 
well,  so  far  as  the  cost  of  operating  and  main- 
taining the  system  goes;  but  you  can  only  guess 
what  the  rightful  demands  of  its  invested  capital 
are,  simply  because  you  do  not  know  what  the 
invested  capital  is.  This  is  a  subject  from  which 
all  men  shy  as  though  it  were  a  ghost.     There 


126  An  American  Transportation  System 

seems  to  be  a  feeling  that  the  very  bottom  would 
fall  out  of  all  things  financial,  if  a  real,  earnest, 
investigation  were  made  of  that  subject. 

It  is  customary  for  our  railway  friends  to  dis- 
pose of  the  whole  subject  of  railway  investment 
and  the  reasonableness  of  rates,  by  one  sweeping 
statement,  to  wit:  that  there  has  never  been  a 
year  in  the  last  quarter  of  a  century  when  the 
railway  system  has  been  able  to  earn  or  pay 
3f  %  on  its  capital  stock,  and  they  add,  that  the 
returns  have  been  as  low  as  1.51%.  This  argu- 
ment would  be  conclusive  but  for  one  fact;  it 
assumes  the  very  question  at  issue,  that  the 
capital  stock  upon  which  this  low  rate  was  earned 
and  paid,  represents  the  honest  investment. 

Now,  one  of  two  conclusions  is  irresistible. 
In  this  matter  of  railway  investment  and  rates, 
either  the  American  people  have  been  utterly 
dishonest  toward  their  railway  system,  or  the 
railway  system  has  been  utterly  dishonest  toward 
the  people.  Let  each  man  take  whichever  horn 
of  the  dilemma  suits  him  best.  For  there  has 
never  been  a  time  during  our  railway  era,  when  a 
considerable  percentage  of  our  railways  have  not 
been  in  bankruptcy,  and  first  and  last,  most  of 
them  have  been  bankrupt  at  some  time,  and 
some  of  them  more  than  once.  There  have 
been  times  when  one-quarter  of  our  entire  railway 
system  has  been  in  the  bankruptcy  court. 

But  this  it  not  all.     No  more  delusive  argument 


Wrong  in  Our  Transportation  System  127 

was  ever  advanced,  than  that  based  on  the  average 
per  cent,  of  dividends  paid.  The  inference  is  that 
because  the  average  per  cent,  was  low,  therefore 
the  capitalization  cannot  be  high.  The  simple 
facts  are:  that  there  has  never  been  a  time  when 
more  than  66$  %  of  capital  stock  paid  any  divi- 
dend at  all;  that  up  to  1906  (the  latest  report) 
there  were  only  six  years  when  more  than  50% 
of  the  capital  paid  any  income  at  all;  while  there 
have  been  years  when  more  than  70%  of  the  capi- 
tal and  20%  of  the  bonded  debt,  went  absolutely 
without  one  cent  of  return. 

This  matter  is  so  important  and  significant, 
that  I  must  bother  you  with  a  table  showing  the 
billions  of  dollars  alleged  to  be  invested  in  our 
railways,  which  brought  no  return  to  the  alleged 
investors. 

Table  showing  railway  capital  receiving  no  return 


Year 

Amount 

Per  cent,  of  stock  Per  cent,  of 

1888 

S3.201. 75S.225 

61.44 

21.69 

1889 

3.397.291.587 

61.67 

18.19 

1890 

*2,8i  1,526,552 

63.76 

1891 

3,128,183,917 

59-64 

9.90 

1892 

3.585.122,746 

60.60 

I5-56 

i893 

3.6°2,349.7°4 

61.24 

14-39 

1894 

3,980,907,701 

6343 

17.29 

i895 

4,366,201,663 

70.06 

16.71 

1896 

4,528,062,636 

70.17 

16.26 

1897 

4,629,043,117 

70.10 

16.59 

1898 

4.422,557,861 

66.26 

15.82 

1899 

3,847,919,927 

5939 

10.45 

*  Stock  onfy. 

i28  An  American  Transportation  System 


Year 

Amount 

Per  cent,  of  stock 

Per  cent,  of  bonds 

1900 

$3.S55,547,5°4 

54-34 

6.78 

1901 

3,190,896,228 

48.73 

6.23 

1902 

2.980,731,857 

44.60 

4.89 

1903 

2,977,609,584 

43-94 

4-33 

1904 

2,997,366,225 

42.53 

4-49 

1905 

2,884,570.733 

37-i6 

6.36 

1906 

2.564,756,184 

33-46 

3.82 

Now  if  these  billions  earning  nothing,  are  honest 
capital,  invested  in  an  industry  indispensable  to 
the  American  people,  have  we  not  been  most 
niggardly,  yes,  most  dishonest,  in  refusing  to 
allow  them  to  earn  a  fair  return  or  any  return  at 
all?  Or  shall  we  say  that  these  billions  earning 
nothing,  do  not  represent  any  honest  investment 
at  all,  and  therefore  were  not  entitled  to  any 
return?  Whichever  way  we  look  at  it,  the  pros- 
pect is  anything  but  pleasant.  But  the  important 
deduction  from  the  showing  is,  that  nobody  can 
tell  what  our  railways  have  cost,  or  what  they 
should  be  valued  at,  or  what  the  investment 
in  them  is,  and  therefore  no  one  can  tell  what 
reasonable  rates  should  be  charged  to  bring  a 
fair  return  to  the  investment. 

However,  I  think  some  light  may  be  thrown 
on  the  problem  of  what  it  has  cost  to  produce  our 
railway  system,  and  the  relation  between  that 
cost  and  the  capitalization  of  the  system  and 
therefore,  incidentally,  some  light  may  be  thrown 
on  the  rates  which  would  produce  a  fair  return. 
It  is  well  known  that  the  railways  keep  an  account 


Wrong  in  Our  Transportation  System  1 29 

called  "Cost  of  road  and  equipment."  Into  this 
account  is  put  every  item  which  is  supposed  to 
have  entered  into  the  cost  of  the  road  and  its 
equipment.  As  the  roads  have  no  special  reason 
for  keeping  the  account  small,  but  have  every 
reason  for  exaggerating  it  in  every  possible  way, 
no  injustice  will  be  done  them  by  preliminarily 
accepting  their  own  figures.  These  we  will  com- 
pare with  the  capitalization  of  the  roads,  as  it  is 
shown  in  the  amount  of  their  stocks  and  bonds. 
These  respective  accounts  show  as  follows  as  of 
December  31,  1907.  (See  Poor's  Manual,  1908, 
p.  clxiv.) 

Stocks  and  bonds  outstanding $16,501,413,069 

Cost  of  road  and  equipment 13,364,275,191 

Excess  of  stocks  and  bonds  over  alleged 

cost  of  road  and  equipment ^3,^37,i37j8T8 

Two  remarkable  coincidents  appear  from  these 
figures  showing  the  excess  of  outstanding  capital 
above  the  cost  of  roads  and  equipment.  The 
figures  are  about  the  same  as  the  average  of  capi- 
tal which  returns  no  income,  and  the  amount  is 
about  the  same  as  the  amount  of  stocks  and  bonds 
which  the  railway  corporations  own  in  each  other. 
But  neither  of  these  coincidental  facts  is  important 
at  present. 

The  important  deduction  to  be  drawn  just  at 
present  is:  that  if  the  roads  were  capitalized  at 
what  they  are  alleged  to  have  cost,  the  rates  which 
9 


130  An  American  Transportation  System 

are  now  being  charged,  would  pay  interest  at  the 
rate  of  6%  per  annum  on  every  dollar  of  capital 
invested  in  the  system.  If,  therefore,  we  should 
say  that  6%  is  a  reasonable  return  upon  capital 
invested  in  railways,  then  it  is  evident  that  the 
rates  charged  at  the  present  time  are  reasonable. 

But  a  little  further  investigation  into  the  ac- 
count called  "Cost  of  road  and  equipment," 
may  be  desirable.  I  speak  not  now  of  the  fact 
that  this  account  has  been  stuffed  in  every  con- 
ceivable manner;  but  taking  the  railways'  own 
figures  for  the  total  cost  of  road  and  equipment 
at  the  end  of  the  year  1907,  you  will  see  that,  by 
dividing  those  figures — $13,364,275,191 — by  the 
total  miles  of  track — 224,033,  you  obtain  about 
$60,000  as  the  railways'  own  estimate  of  the  cost 
of  each  mile  of  track  with  its  equipment. 

I  am  anxious  to  know  whether  this  average 
cost  of  road  and  equipment  has  been  maintained 
during  the  seven  year  period — 1900-1907.  Here 
are  the  figures. 

Cost  of  road  and  equipment  1907 $13,364,275,191 

1900 10,484,430,907 

Total  cost  of  adding  32,221  miles  of  track 

with  equipment  1 900-1 907 $2,879,844,284 

Average  cost  per  mile 89,377 

Thus  it  will  -be  seen  that  the  average  cost  of 
acquiring  road  and  equipment  in  the  last  seven 
years,  has,   according  to  their  own  figures,  in- 


Wrong  in  Our  Transportation  System  131 

creased  nearly  $30,000  a  mile  over  the  average 
cost  throughout  the  entire  railway  era.  But, 
remarkable  to  say,  the  average  amount  of  stocks 
and  bonds  issued  per  mile  of  road  in  the  last 
seven  years,  has  been  upward  of  $143,000  or  over 
$53,000  more  per  mile  than  the  average  "cost  of 
road  and  equipment."  Thus,  you  will  see  that 
in  the  last  seven  years  the  capitalization  has 
increased  nearly  one  and  three-quarter  billions 
in  excess  of  the  cost  of  the  road  and  equipment 
acquired,  even  according  to  their  own  showing. 
In  the  face  of  these  facts,  how  can  any  one  who 
wants  to  be  just,  come  to  any  rational  conclusion 
as  to  what  rates  it  would  be  reasonable  to  charge 
to  bring  a  fair  return  to  the  capital  honestly  in- 
vested in  railways?  We  must  first  determine  by 
some  means  what  that  honest  capital  is. 

Is   Our    Railway  System's  Management  such 

as  to  Prevent  it  Being  Used  as  a  Means 

of  Illegal  Gain  ? 

The  theory  of  a  corporation 

In  legal  theory,  the  property  of  a  corporation 
belongs  to  its  stockholders  and  is  administered 
entirely  for  their  benefit.  As  the  stockholders 
are  usually  too  numerous  to  devote  their  personal 
attention  to  the  business  of  the  corporation,  they 
meet  at  stated  intervals  and  elect  a  certain  num- 


132  An  American  Transportation  System 

ber  of  their  members  to  represent  them  in  the 
active  management  of  the  business  of  the  corpora- 
tion. These  elected  members  are  called  directors 
or  trustees. 

The  relation  between  the  trustees  and  the 
body  of  shareholders  is  one  of  trust  and  confi- 
dence, and  is  governed  by  the  same  legal  and  moral 
principles  which  govern  the  relations  between  any 
other  trustees  and  their  beneficiaries.  These 
trustees  are  not  allowed  to  engage  in  any  under- 
taking which  is  antagonistic  to  the  interests  of 
their  beneficiaries.  They  cannot  make  any  per- 
sonal gain  out  of  the  use  of  the  property  or  funds 
of  their  wards,  nor  can  they  use  any  information 
which  they  have  obtained  as  trustees  to  their 
own  advantage.  They  are  bound  at  all  times 
to  keep  their  beneficiaries  fully  and  fairly  in- 
formed as  to  any  matter  affecting  their  interests 
or  the  property  which  is  the  subject  matter  of  the 
trust.  Taking  it  for  all  in  all,  this  trusteeship 
establishes  the  most  delicate  relation  known  to 
the  law,  and  calls  for  the  highest  order  of  honor- 
able dealing. 

The  corporation  in  practice 

But  too  often  the  corporation  in  theory  and 
the  corporation  in  practice  are  widely  different. 
The  trustees,  often  elected  by  their  own  votes 
and  the  votes  of  their  satellites  and  perpetuated 


Wrong  in  Our  Transportation  System  133 

in  power  in  the  same  way,  come  to  regard 
themselves  as  the  corporation.  The  rights  of 
stockholders  are  ignored,  important  information 
concerning  the  affairs  of  the  corporation  is  with- 
held or  given  to  the  stockholders  on  demand  most 
grudgingly  and  misleadingly,  or  denied  in  toto, 
while  the  corporation  trustee  who  would  shrink 
from  making  personal  gain  out  of  the  information 
which  came  to  him  by  means  of  his  position  of 
trust,  is  indeed,  exceptional.  If  I  mistake  not, 
most  railway  managers  regard  it  as  their  special 
prerogative,  to  make  money  for  themselves  by 
means  of  the  information  gained  by  them  as 
managers,  and  by  them  withheld  from  the  body 
of  stockholders.  Where  would  one  look  to  find 
a  railway  trustee  who,  knowing  that  an  important 
fact  engineered  by  himself  and  affecting  the  value 
of  the  securities  of  his  road  was  about  to  be  made 
public,  would  hesitate  to  make  profit  for  himself 
before  informing  his  fellow  stockholders  of  the 
fact?  If  dividends  are  to  be  increased,  decreased 
or  suspended,  if  valuable  connections  are  to  be 
made,  if  rumors  themselves  are  to  be  floated, 
shall  not  the  manager  use  his  knowledge  to  feather 
his  own  nest?  To  ask  the  question  is  to  answer 
it.  By  just  such  means  has  the  fortune  of  many 
a  railway  manager  been  piled  up  into  the  millions. 
He  would  spurn  the  imputation  that  he  had  done 
anything  wrong  or  dishonorable.  He  would  have 
considered  it  boyish  not  to  have  availed  himself 


134  An  American  Transportation  System 

of  his  position.  Instances  are  not  wanting  where 
trustees  have  even  borrowed  the  funds  of  their 
corporation  to  speculate  with  in  the  securities 
of  their  own  and  other  corporations.  Nor  is  the 
case  unknown  of  trustees  unloading  their  own 
bad  investments  upon  their  corporations,  or  the 
sale  to  them  of  securities  at  most  exaggerated 
prices.  Nor  need  I  more  than  mention  the  well 
known  fact,  that,  from  the  first,  it  has  been  an 
all-too-common  custom  for  railway  directors  to 
be  interested  in  contracts  for  construction  work, 
which  contracts  they  made  as  trustees  with  them- 
selves; or  in  syndicates  and  banks  underwriting 
and  buying  the  securities  of  their  corporations, 
sometimes  at  unwarrantable  discounts. 

The  law  condemns  as  utterly  illegal  every 
transaction  between  a  director  of  a  corporation 
and  his  corporation,  in  the  making  of  which  he 
participates.  But,  it  is  said,  there  is  no  law 
governing  any  transaction  involving  more  than  a 
million  dollars. 

How  managerial  control  is  perpetuated 

In  this  book  reference  has  been  made  to  the 
control  of  railway  corporations  by  virtue  of  the 
stocks  which  they  own  in  one  another.  There 
are  but  comparatively  few  of  these  corporations 
having  only  one  kind  of  stock.  Generally  speak- 
ing, they  all  have  both  common  and   preferred 


Wrong  in  Our  Transportation  System  135 

stock,  the  relative  amount  of  these  being  about 
four  shares  of  common  to  one  share  of  preferred. 
On  June  30,  1906,  the  gross  amount  of  outstanding 
common  was  $5,403,001,962  and  the  preferred 
$1,400,758,131.  It  is  rare  that  both  kinds  of 
stocks  participate  in  the  election  of  trustees. 
In  some  corporations  only  the  holders  of  the 
common  stock  are  allowed  to  vote ;  in  others  only 
the  preferred  shareholders  and  in  a  few  both 
kinds  have  voices  in  the  election  of  directors. 

Now  if  one,  or  a  number  of  men,  or  if  one,  or  a 
number  of  corporations,  desire  to  obtain  control 
of  a  particular  corporation,  it  is  obvious  that  all 
that  is  necessary  is  to  acquire  the  command  of 
a  majority  of  the  particular  kind  of  shares  that 
have  the  voting  privilege.  When  you  recall  that 
the  capital  invested  in  the  bonds  of  a  railway 
corporation  has  absolutely  no  voice  in  the  manage- 
ment of  its  affairs,  and  that  generally  only  one 
kind  of  stock  has  the  voting  privilege ;  it  may  be 
readily  seen  that  a  particular  corporation  may  be 
dominated  and  controlled  by  the  owners  of  a  small 
minority  of  the  invested  capital,  and  that  all  the 
railway  corporations  in  the  United  States  may  be 
dominated  and  controlled  by  a  small  minority  of 
the  total  invested  capital. 

This  matter  is  of  so  much  importance  that  it 
is  necessary  to  fully  demonstrate  and  impress  it 
upon  the  student.  Thus  on  the  30th  of  June, 
1906,  according  to  the  statistical  reports  of  the 


136  An  American  Transportation  System 

Interstate  Commerce  Commission,  the  following 
amounts  of  the  different  kinds  of  railway  capital 
existed. 

Bonds  (of  all  kinds) $7,766,661,385 

Common  Stock 5,403,001,962 

Preferred  Stock 1.400,758,131 

Total $14,570,421,478 

It  is  obvious  that  at  the  utmost,  no  more  than 
51%  of  the  aggregate  of  common  and  preferred 
stock  was  necessary  to  the  control  of  this  entire 
capital.  In  other  words,  the  command  of  not 
more  than  $3,401,880,046  of  the  capital  was  neces- 
sary to  dominate  and  control  fourteen  billions  and 
a  half.  The  command  of  less  than  25%  of  the 
capital  can  command  the  whole. 

But  let  no  man  imagine  that  it  is  necessary  to 
command  25%  or  anything  like  it,  to  command  the 
entire  railway  capital  of  this  country.  The  rail- 
way corporations  have  fixed  that  matter  so  that  the 
control  of  5%  or  10%  of  the  aggregate  capital 
of  some  corporations,  is  all  that  is  necessary  to 
obtain  and  hold  dominance  in  those  corporations. 
In  the  first  place,  it  is  rarely  the  case  that  both 
the  common  and  the  preferred  stock  have  voting 
privileges.  These  are  usually  conferred  exclusively 
upon  one  or  the  other.  So  that  the  utmost  amount 
necessary  to  be  commanded  to  control  the  en- 
tire system,  is  less  than  $2,702,000,000  or  about 
18%. 


Wrong  in  Our  Transportation  System  137 

But  when  you  turn  to  particular  corporations 
you  will  be  simply  dumfounded  to  learn  the 
relatively  small  percentage  of  their  aggregate 
capital  which  controls  them.  Thus  the  Rock 
Island  Company  controls  14,269  miles  of  railway, 
the  total  capital  of  which  is  $777,000,000.  This 
entire  system  and  its  capital  is  controlled  by  a 
majority  of  the  preferred  stock  of  the  Rock  Is- 
land Company,  the  common  stock  not  having 
voting  privileges.  The  preferred  stock  outstand- 
ing June  30,  1907,  was  $49,047,390,  51%  of  which, 
the  utmost  necessary  to  control,  is  $25,014,168, 
or  a  little  over  3%  of  the  entire  capital!  If,  now, 
you  take  into  consideration  the  further  fact, 
that  on  the  day  before  Christmas,  1908,  as  I  am 
writing  these  lines,  the  preferred  stock  of  the 
Rock  Island  Co.  is  selling  at  61  cents  on  the  dollar, 
you  will  perceive  that  by  some  legerdemain  of 
railway  finance,  an  investment  of  $15,000,000 
controls  an  investment  of  $777,000,000. 

This  process  of  obtaining  control  of  our  railways 
has  been  going  on  for  years  under  the  eyes  of 
Congress  and  the  Interstate  Commerce  Commis- 
sion; yet,  so  far  as  I  know,  the  former  has  never 
deemed  it  worthy  of  its  consideration — at  least 
not  of  any  action — and  the  latter  passed  it  by 
without  serious  comment  until  last  year,  when — 
the  damage  having  been  mostly  accomplished — 
it  became  suddenly  jolted  by  the  fact.  After 
briefly  reviewing  the  conditions  as  though  they 


138  An  American  Transportation  System 

were  something  newly  discovered,  it  concludes 
its  summary  of  one  company  as  follows : 

"This  holding  company  [Atlantic  Coast  Line 
Co.]  with  a  comparatively  small  capitalization, 
which  represents  less  of  actual  investment,  prob- 
ably not  more  than  $5,000,000,  is  in  virtual 
control  of  railway  systems  over  11,000  miles  in 
length." 

But  the  significant  and  all-important  fact  to 
be  seen  in  this  control  of  railway  corporations,  is 
not  the  fact  that  it  has  consolidated  railway  inter- 
ests, a  result,  in  my  judgment,  both  inevitable 
and  justifiable,  nor  the  fact  that  the  control  is  by 
virtue  of  the  ownership  of  large  quantities  of 
stocks  by  individuals;  but  the  fact  that  the  control 
is  vested  in  corporations  by  virtue  of  their  owner- 
ship of  the  voting  stocks  of  each  other,  thus  giving 
their  managers  or  trustees  unlimited  capacity  and 
opportunity  to  make  for  themselves  illegal  gain. 
The  process  is  practically  as  follows :  The  trustees 
use  the  funds  of  their  corporations  to  buy  stocks 
in  other  corporations  for  their  own  corporations. 
These  stocks,  do  not  of  course,  belong  to  the 
trustees,  but,  by  virtue  of  their  office,  they  not  only 
vote  them  at  elections  but  they  do  with  them 
whatever  else  they  want  to  do  short  of  giving 
them  away  or  stealing  them  outright.  They  buy 
them  and  they  sell  them  when  they  want  to.  As 
the  aggregate  of  securities  owned  by  corporations 
in  each  other,  and,  therefore,  most  largely  subject 


Wrong  in  Our  Transportation  System  139 

to  the  control  of  their  trustees,  is  over  three  bil- 
lions of  dollars,  it  must  be  obvious  that  corporate 
dealings  in  each  other's  securities  have  a  potent 
influence  upon  the  market  for  railway  securities. 
Thus  the  trustees,  exercising  their  discretion  to 
buy  and  sell  the  securities  of  their  corporations, 
are  in  a  position  to  influence  the  stock  market 
without  involving  their  private  fortunes  otherwise 
than  to  take  advantage  of  the  markets  thus  made 
or  unmade.  Given  this  reserve  of  three  billions 
of  securities  for  their  stock-market  capital,  it  is 
not  wonderful  that  they  are  able  to  pick  up  an 
honest  living  for  themselves. 

The   immensity   of   railway   transactions 

Railway  transactions,  physical  and  financial,  are 
so  stupendous  that  the  figures  representing  them 
no  longer  find  response  in  the  human  mind.  Dif- 
ferences of  a  hundred  million  one  wray  or  the  other 
pass  unnoticed.  Calculations  based  upon  the 
statistics  of  last  year,  are  apt  to  muddle  the  figures 
of  this  year.  Even  the  best  and  most  painstaking 
collectors  of  railway  facts  are  widely  at  variance. 
For  instance  Poor's  Manual,  the  recognized 
commercial  authority  on  railway  matters,  gives 
the  number  of  miles  of  completed  railroads  at  the 
close  of  the  fiscal  year  June  30,  1907,  as  224,382.19, 
while  the  statistical  report  of  the  Interstate  Com- 
merce Commission  for  1907  states  that  "On  June 


140  An  American  Transportation  System 

jo,  1906,  the  report  shows  that  the  total  single- 
track  railway  mileage  in  the  United  States  was 
224,363.17  miles  "  {Report,  1907,  page  152). 
From  this  one  would  infer  that  the  mileage  had 
increased  from  June  30,  1906,  to  June  30,  1907, 
just  19.02  miles.  At  the  same  time  we  are 
definitely  informed  that  the  mileage  actually  in- 
creased between  those  dates  nearly  6000  miles. 
And  if  we  compare  the  reports  of  these  two  au- 
thorities on  the  same  date,  June  30,  1906,  we 
find  that  Poor  gives  the  completed  mileage  on 
that  date  as  218,433  miles,  which  is  nearly  6000 
miles  less  than  is  shown  by  the  Interstate  Com- 
mission statistics  as  above  stated. 

If  from  the  mileage  figures  we  turn  to  the  capi- 
talization figures,  we  are  still  more  surprised  at 
the  differences  shown.  Poor  gives  the  outstand- 
ing capital  stock  on  June  30, 1 906,  as  $7,106,408,976 
(Manual,  1907).  The  Interstate  Commerce  Com- 
mission gives  it  as  $6,803,760,093  (Report,  1907, 
page  154).  In  other  words,  Poor's  mileage  is 
6000  miles  less  and  stock  capitalization  $300,000,- 
000  more  than  the  Interstate  Commerce  Commis- 
sion report  shows  on  the  same  date.  Doubtless 
these  trifling  differences  are  capable  of  explanation, 
but  the  figures  are  given  just  as  they  appear  in  the 
hope  that  I  may  be  excused,  if  in  this  book  I  may 
be  so  unfortunate  as  to  have  gotten  a  few  hundred 
millions  away  from  the  exact  facts. 

Again,  as  of  June  30,  1907,  Poor  gives  the  total 


Wrong  in  Our  Transportation  System  141 

of  railway  assets  as  $18,649,289,250.  So  far 
as  this  argument  is  concerned,  it  makes  no  differ- 
ence whether  the  total  be  a  billion  one  way  or  the 
other.  The  important  point  is,  that  no  such 
wealth  as  this  was  ever  before,  in  the  world's  history, 
placed  under  the  management  and  control  of  a  few 
men. 

When  we  stop  to  consider  that  at  least  one- 
sixth  of  the  wealth  of  the  whole  country  is  held 
in  trust  by  a  dozen  or  so  of  the  dominant  spirits 
of  the  American  railway  world;  that  they  have 
in  their  service  more  than  a  million  and  a  half  of 
men,  representing  seven  millions  and  a  half  of 
the  people  of  this  country — a  twelfth  of  its  popu- 
lation; that  the  instrumentality  with  which  they 
deal  is  the  very  life  blood  of  the  nation ;  and  when 
we  see  this  mighty  mass  of  wealth,  like  a  stupen- 
dous sky-suspended  pendulum,  regularly  swaying 
back  and  forth,  back  and  forth,  ever  gathering 
its  load  on  one  side  and  dropping  it  on  the  other; 
when  we  soberly  consider  these  things  they  must 
make  us  pause. 

Is  not  the  confidence  of  the  American  people 
sublime,  that  they  have  permitted  these  few  men 
to  vest  themselves  with  a  trust  and  power  so 
gigantic?  And  is  not  this  confidence  especially 
sublime,  when  we  remember  that  this  trust  and 
this  power  are  vested  to  be  exercised  at  the  will 
of  the  trustees,  acknowledging  no  court  to  call 
them  to  account  ?     What  good  men  these  trustees 


142  An  American  Transportation  System 

should  be,  how  untainted  their  histories,  how  un- 
selfish their  devotion  to  their  trust,  how  above 
suspicion  that  they  would  use  it  for  their  personal 
gain — and,  of  course,  they  would  not  and  have 
not  and  will  not.  Sleep  on  blind  nation!  Your 
trust  and  confidence  are  sublime! 

And  how  comes  it  that  these  men  were  able  to 
invest  themselves  with  this  trust?  Did  they 
create  the  wealth  that  they  control?  No,  admit- 
tedly no.  Then  how  came  they  into  this  absolute 
control  of  that  they  did  not  make  and  do  not 
own?  Genius,  genius,  not  in  creating  wealth, 
but  genius  in  obtaining  the  use  of  other  men's 
money  with  or  without  the  knowledge  of  its 
owners.  Genius,  also,  in  using  the  money  of 
their  roads  to  buy  up  one  another.  And,  there- 
fore, genius  in  watching  and  standing  by,  one 
another;  until  now  no  power  can  divest  these 
men  of  their  trusts,  except,  of  course,  the  possibil- 
ity of  a  falling  out  among — themselves. 

Such,  in  brief,  is  the  control  of  one-sixth  of  a 
blind  nation's  wealth.  Verily  these  trustees 
may  say,  after  their  great  exemplar,  that,  con- 
sidering their  opportunities,  they  are  amazed  at 
their  moderation. 

In  the  way  of  justice 

If  any  one  has  read  this  section,  he  will  remem- 
ber that  it  is  headed  by  a  question,  not  by  an 
assertion.     "Is  our  railway  system's  management 


Wrong  in  Our  Transportation  System  143 

such  as  to  prevent  it  being  used  as  a  means  of 
illegal  gain?"  The  whole  force  of  the  question 
lies  in  the  word  prevent.  I  would  have  a  system 
that  does  prevent  the  possibility  of  the  illegal  use 
of  this  great  trust.  I  do  not  assert  that  all  our 
great  railway  men  have  been  violators  of  their 
trust.  On  the  contrary,  I  distinctly  aver  that 
there  have  been  railway  men,  and  great  ones  too, 
who  have  as  faithfully  administered  their  trusts 
as  ever  honorable  guardian  did  the  property  of  his 
infant  ward.  But  there  have  been  other  railway 
men,  and  great  ones  too,  whose  native  honesty 
has  been  subordinated  to  the  accomplishment 
of  a  fixed  purpose. 

Great  men  are  distinctly  of  two  kinds;  those 
who  do  great  deeds,  and  those  who  do  great  deeds 
justly.  And  of  the  latter  there  are  but  few. 
Men  in  the  accomplishment  of  their  ends,  must 
use  the  means  and  methods  that  are  open  to 
them,  and  these  means  and  methods  are  generally 
neither  such  as  they  like  to  employ  nor  such  as 
are  best  fitted  to  accomplish  the  desired  end. 

Now,  in  this  country,  the  last  quarter  of  a  cen- 
tury has  been  marked  by  the  presence  of  some 
half  score  of  men,  possessed  of  an  order  of  organiz- 
ing genius  such  as  the  world  never  before  wit- 
nessed. They  found  our  industries  unprofitably 
cutting  each  other's  throats,  and  they  organized 
them  into  industrial  aggregates  whose  producing 
power  has  stunned  the  world  of  trade  and  com- 


144  An  American  Transportation  System 

merce.  Incidentally  enormous  profits  have  come 
to  themselves  and  to  others.  Most  men  have 
looked  upon  these  great  organizers  as  mere  sordid 
money-getters.  Money-getters  they  have  been, 
sordid  they  may  have  been,  but  I  do  not  believe 
they  have  been  mere  sordid  money-getters.  Be- 
cause I  believe  that  at  the  very  base  and  founda- 
tion of  all  great  minds,  the  moving,  irresistible 
impulse  must  ever  be  to  do  great  things,  and  to 
be  the  means  whereby  things  shall  be  done  better. 
To  them,  poor  and  self-destructive  ways  of  doing 
things  are  intolerable.  There  is  a  kind  of  philan- 
thropy in  what  they  do,  for  they  know  that  in 
the  end  their  fellow  men  will  be  better  served 
than  they  were  before.  But  the  methods  they 
employ  are  often  anything  but  philanthropic. 
And  this  is  so,  not  because  the  methods  used  were 
such  as  they  would  have  selected,  but  because 
they  were  debarred  the  use  of  such  methods  as 
their  own  intelligence  would  have  suggested. 

To  apply  these  suggestions  to  the  matter  in 
hand :  the  disjointed  and  unorganized  railroads  of 
the  United  States  had  to  be  joined  and  organized. 
Now,  if  the  people  of  the  United  States  had  asked 
Mr.  Morgan,  Mr.  Hill,  Mr.  Harriman  and  a  half 
dozen  other  men,  to  sit  down  and  devise  a  trans- 
portation system  for  this  country,  does  any  one 
suppose  that  these  men  would  have  suggested  the 
method  of  organization  that  they  have  pursued? 
But  the  people  of  the  United  States  did  not  ask 


Wrong  in  Our  Transportation  System  145 

these  men  to  organize  a  transportation  system 
for  the  country.  Exactly  what  the  people  said 
to  these  men  was:  "You  shall  not  organize  a 
transportation  system  for  this  country;  you  shall 
not  even  talk  about  it :  if  you  do  we  will  put  you 
in  jail. "  But  the  skeleton  had  to  be  articulated, 
the  nerves  brought  together  and  united  and  the 
whole  organized,  human  laws  to  the  contrary 
notwithstanding.  For  this  was  nature's  law. 
With  the  tools  that  these  men  were  allowed  to 
use,  it  has  been  a  clumsy  and  a  painful  and  a 
costly  surgical  operation,  and  it  is  destined  to  be 
still  more  so  if  the  people  do  not  permit  of  the 
use  of  more  improved  instruments.  Meantime 
I  do  not  know  that  surgeons  Morgan,  Hill,  Harri- 
man  et  al.  need  be  worrying  about  the  terms  of 
their  employment. 

Is  Our  Railway  System  Free   from  a  Cor- 
rupting  Influence   upon  American  Life? 

When  great-minded  men  set  out  to  accom- 
plish great  deeds,  whatever  opposition  shows  it- 
self must  be  disposed  of.  What  they  need  they 
take,  what  opposes  them  they  kill.  It  was  ever 
so  since  the  days  of  Julius  Caesar  and  before. 
With  eyes  set  ever  to  the  front,  they  see  not  the 
wreck  and  ruin  that  strew  their  onward  march. 
Laws!  what  are  laws  but  appeals  and  repeals? 
Over  these  man-made  laws  is  the  grand  law  of 
doing,  accomplishing.     And  time!    how  short  is 


146  An  American  Transportation  System 

time  when  so  much  is  to  be  done.  Nerve-racking 
impatience  suggests  the  quickest  remedy:  no  dog 
e'er  barked  whose  mouth  could  not  be  stopped 
with  meat  enough.  And,  therefore,  feed  the 
yelping  and  disturbing  brutes.  Contempt  for 
men  sits  on  the  brow  of  the  great-minded.  For 
what  are  men,  their  laws,  their  legislatures,  their 
courts,  but  instrumentalities  wherewith  to  do  the 
great  deed?  And  if  they  will  not  work  to  that 
end,  why  then,  work  them. 

If  you  were  to  search  your  memory  for  the 
origin  of  the  great  scandals  which  in  the  last  half 
century  have  disgraced  American  life,  individual, 
municipal,  state  and  national,  you  would  have 
difficulty  in  finding  one  of  a  monumental  charac- 
ter which  could  not  be  traced  directly  or  indirectly 
to  the  doors  of  our  industrial  barons,  and  among 
these  the  chief  offenders  have  been  the  various 
kinds  of  transportation  barons.  The  record  is 
too  shameful  to  be  printed.  From  the  days  of 
the  Credit  Mobilier  to  the  next  to  the  last  presi- 
dential election,  their  hands  have  always  been  in 
politics  and  wherever  shown  have  always  been 
dirty.  They  originated  the  legislative  lobby. 
Whenever  there  was  anything  they  wanted  done, 
or  wanted  not  to  be  done,  in  the  city,  the  state, 
or  the  nation,  they  have  kept  their  human  chat- 
tels in  the  council,  the  legislature,  the  congress. 
They  have  bought  and  owned  municipal  boards 
and  legislatures  as  though  they  were  shares  of 


Wrong  in  Our  Transportation  System  147 

their  own  stocks.  They  have  bred  a  distinct 
variety  of  politicians — men  who  get  into  office 
to  sell  themselves.  In  some  parts  of  the  country 
popular  government  has  ceased  to  exist,  the  elec- 
tive franchise  being  exercised  in  the  office  of  the 
railway  company  that  dominates  the  state.  These 
men  have  been  courted  by,  and  in  turn  have  de- 
manded the  allegiance  of  political  parties.  They 
have  spent  their  money  to  elect  presidents  of  the 
Republic,  and  have  shamelessly  called  the  fact 
to  public  attention  when  measures  have  been 
proposed  contrary  to  their  interests. 

Will  you  tell  me  these  things  can  be  and  the 
public  conscience  escape  corrupting  taint?  Look 
at  it  broadly.  What  is  the  all-potent  argument 
addressed  to  voters  to-day?  To  the  laborer  it 
is  this:  vote  thus,  or  you  will  lose  your  job.  To 
all  others  it  is  this :  vote  thus,  or  you  will  lose  your 
money.  Will  you  tell  me  that  such  an  appeal 
could  have  become  universal,  but  for  the  fact 
that  it  is  addressed  to  a  corrupted  populace? 
The  truth  is  our  financial  barons  have  set  the 
example  of  wrong-doing  on  a  scale  so  magnificent 
that  the  millions  have  rushed  in  each  for  his  small 
share  of  the  plunder.  When  a  free  people  can 
say:  "Feed  us  and  we  will  be  your  servants," 
they  are  no  longer  free. 

Why  Our  Railway  System    Is  as  it  Is 
We  have  seen  that  our  railway  transportation 


148  An  American  Transportation  System 

system — magnificent  as  it  appears  to  be  as  a 
physical  fact,  and  stupendous  as  it  appears  to  be 
as  a  financial  operation — is  grossly  lacking  in  the 
qualities  which  an  ideal  system  should  possess. 
We  have  seen  that  the  measure  of  safety  it  affords 
is  greatly  below  that  of  railways  elsewhere  in  the 
world,  that  it  has  but  two-thirds  the  efficiency 
required,  that  it  is  grossly  wasteful  in  its  physical 
operations,  that  as  a  financial  operation,  it  is  a 
disgrace  alike  to  itself  and  the  country  which 
fostered  it,  that  it  has  been  at  all  times  at  enmity 
with  the  people  and  that  in  its  attempt  to  de- 
stroy opposition,  it  has  corrupted  the  American 
conscience. 

If,  now,  we  inquire  why  our  railway  system 
has  grown  up  and  developed  into  something  so 
different  from  what  it  should  have  been,  we  will 
not  have  far  to  go  for  the  answer.  Even  at  the 
risk  of  being  called  unpatriotic,  I  am  compelled 
to  say  the  reason  is,  because  the  system  has  been 
and  is  so  essentially  American.  It  is  bone  of  the 
bone,  flesh  of  the  flesh  of  our  country.  I  doubt 
whether  it  could  have  been  produced  any  place 
else  on  earth  except  in  America.  Not  only  is  the 
system,  itself,  but  the  men  who  manage  it  and 
the  people  who  suffer  under  it,  all  alike  American. 

Brushing  aside  all  minor  causes,  all  mere  inci- 
dents, all  sports  and  offshoots,  and  looking  only 
for  the  fundamental  cause  of  the  divergence  of  our 
railway  system  from  the  best  type,  we  will  find 


Wrong  in  Our  Transportation  System  149 

that  cause  to  be  this:  it  has  grown  up  acknow- 
ledging responsibility  to  no  power  and  with  no 
power  capable,  even  if  desirous,  of  imposing  re- 
sponsibility upon  it. 

It  is  the  chief  glory  of  the  Anglo-Saxon  race 
that  whatever  responsibility  it  acknowledges  is 
self-imposed  and  this  conception  of  responsibility 
has  been  deified  in  the  United  States.  This  self- 
imposed  individual  responsibility  has  been  ex- 
tended to  those  aggregates  of  individuals  called 
corporations.  They  also  have  demanded  the  right 
to  be  a  law  unto  themselves,  to  be  allowed  to  gov- 
ern themselves,  to  resent  every  effort  of  the  state 
to  restrict  or  restrain  them' — to  interfere  with 
them  in  any  way.  And  for  the  most  part  and  in 
all  great  and  essential  matters,  they  have  had  their 
way.  And  not  one  man  in  a  thousand  will  be 
found  to  say  that  this  is  not  for  the  best.  Deep 
down  underneath  the  hundreds  of  puny,  pestif- 
erous laws  being  daily  enacted,  will  be  found  this 
fundamental  conception  in  the  mind  of  every 
American:  we  cannot  tolerate  the  restraining 
hand  of  government  upon  individual  or  corporate 
enterprises;  on  the  contrary,  if  government  has 
any  function  at  all  it  must  be  shown  in  the  en- 
couragement and  protection  of  individual  and 
corporate  enterprises.  And  hence,  individual  in- 
vidualism  and  corporate  individualism  have  run 
riot  in  these  United  States.  Hence  it  is  that  our 
railway  system  has  grown  up  with  no  governing 


150  An  American  Transportation  System 

hand  upon  it ;  on  the  contrary  the  governing  hand 
has  fed  it  with  gifts  of  principalities. 

If  the  system  is  over-capitalized  why  should  it 
not  be  ?  Has  there  been  anything  to  prevent  it  ? 
If  stock  has  been  a  fiction,  was  there  any  law 
requiring  it  to  be  real?  If  we  have  bred  a  race 
of  giants,  are  they  not  our  giants,  suckled  at  the 
breast  of  America  ?  If  these  giants  now  hold  in 
their  keeping  a  sixth  part  of  our  wealth  and  the 
very  welfare  of  our  country,  are  we  still  not  justly 
proud  of  them  as  the  greatest  product  of  unre- 
strained individualism  ?  If  justice  herself  has  been 
subordinated  to  individualism,  may  we  not  still 
say:     "We  have  been  faithful  to  our  ideal. " 

In  the  development  of  our  respect  for  individual- 
ism we  have  lost  the  sense  which  distinguishes 
acts  which  are  criminal.  To  steal  bread  is  a 
crime,  but  to  manipulate  a  market  so  that  thou- 
sands will  be  robbed  of  millions,  is  individual 
enterprise!  The  till-tapping  railway  clerk  is  a 
criminal,  but  the  railway  trustee  who  votes  a 
stock  dividend  of  thirty  millions,  is  a  gentleman 
engaged  in  industrial  enterprise! 

Society  exists  for  the  protection  of  the  indi- 
vidual. Yes,  truly;  but  when  shall  we  come  to 
realize  that  the  individual  who  persistently 
works  the  society  for  his  own  benefit,  is  no  longer 
an  individual.  Call  him  by  whatever  name  you 
will,  the  essential  fact  is,  that  he  has  turned  the 
table  on  society  and  become  the  ruling  power. 


Wrong  in  Our  Transportation  System  151 

Thus  it  is  that  a  country  may  be  so  free  that 
it  does  not  recognize  the  power  that  rules  it. 

And  this  irresponsibility  of  our  railway  cor- 
porations has  been  splendidly  fostered  by  our 
dual  form  of  government.  To  the  states  the 
corporations  owe  their  origin ;  often  their  physical 
operations  and  their  very  properties  lie  in  several 
states;  while  the  United  States  exercises  over  all 
its  national  power  to  regulate  commerce  among 
the  states.  Divided  authority  is  and  ever  has 
been  no  authority.  And,  therefore,  our  just  fear 
of  the  concentration  of  power  in  the  federal  govern- 
ment, the  relatively  small  scope  of  state  authority, 
the  indifference  shown  by  some  states  to  the 
exercise  of  the  authority  they  have,  the  open 
bidding  by  some  states  for  corporate  immunity 
from  control  and  sundry  lesser  influences  to  be 
hereafter  mentioned,  have  all  played  for  the 
increase  of  corporate  irresponsibility. 

Not  that  we  have  not  done  something — nation 
and  state — in  the  direction  of  controlling  our 
railway  system.  But  when  I  look  at  the  efforts 
which  have  been  made  and  the  results  which  have 
been  attained,  I  am  not  greatly  impressed.  The 
laws  which  have  been  aimed  at  it  have  pestered 
it,  like  pin  sticks.  It  has  been  angered  not  con- 
trolled or  made  better.  The  main  trouble  with 
all  our  railway  and  corporate  laws  is,  that  they 
have  been  anti.  They  have  been  destructive 
not  constructive.      They  have   been   piecemeal, 


152  An  American  Transportation  System 

not  comprehensive.  There  has  never  been  a  law 
nor,  I  believe,  the  suggestion  of  a  law,  looking  to 
the  organization  of  our  railways  into  a  unified 
and  harmoniously  working  transportation  system. 
Oddly  enough,  our  legislative  efforts  seem  to  have 
been  directed  at  the  prevention  of  a  comprehen- 
sive transportation  system.  To  this  end  our 
railway  men  have  been  working. 

These  anti  laws  obstructing  the  natural  course 
of  railway  organization  and  development,  have 
been  potent  forces  urging  our  railway  managers 
to  the  use  of  means  and  methods  which  they 
would  not  otherwise  have  adopted.  At  any  rate 
this  much  may  be  said:  From  the  standpoint 
of  the  public  welfare,  our  railway  managers  could 
not  have  done  worse  if  there  had  never  been  an 
anti-railway  law  upon  the  statute  books  of  either 
state  or  nation.  If  twenty-five  years  ago  congress 
had  passed  a  ten  line  act  it  would  have  saved  this 
nation  billions  of  dollars.  It  might  have  read 
something  like  this:  Railways  engaged  in  inter- 
state commerce,  may  consolidate  at  will,  but  the 
capitalization  of  roads  so  consolidated  shall  in 
no  case  exceed  the  aggregate  value  of  their  pro- 
perties. Railway  corporations  are  prohibited 
from  owning  the  securities  of  one  another.  Rates 
may  be  charged  sufficient  to  bring  a  return  of 
—  *  per  cent,  on  the  invested  capital. 

1  Whatever  per  cent,  the  lawmaking  power  might  have 
deemed  reasonable. 


Wrong  in  Our  Transportation  System  153 

If  there  have  been  laws  against  railways,  and 
there  have  been  an  abundance  of  them,  then 
there  must  have  been  wrongs,  actual  or  imagined, 
at  the  correction  of  which  these  laws  have  been 
aimed.  From  thirty  to  fifty,  more  or  less,  legisla- 
tive bodies  per  annum,  an  equal  number  of  gov- 
ernors, sundry  commissions,  a  national  congress 
and  numerous  chief  executives,  all  filled  with 
patriotism,  with  anxiety  for  the  public  good, 
with  probity  and  honesty,  have  had  fifty  years 
and  more,  with  numerous  changes  of  political 
parties,  platforms,  policies  and  personnel  to  view 
and  study  the  growth  of  our  transportation  sys- 
tem. What  in  it  of  wrong  has  appealed  to  them 
as  worthy  of  the  exercise  of  their  several  and 
collective  wisdom,  we  will  now  review. 


PART  II 

LEGISLATIVE    ATTEMPTS    TO    CORRECT 
WRONGS  IN  OUR  TRANSPORTATION 

SYSTEM 

Legislation  Concerning  Safety 
The  principles  of  railway  accident  law 

If  one  may  but  penetrate  the  enthroned  mystery 
of  the  law  and  its  administration,  he  will  find  them 
governed  by  a  comparatively  few  great  principles. 
Thus,  for  instance,  the  law  is  essentially  the  sci- 
ence of  remedies  for  wrongs.  It  is  not  essentially 
a  science  for  the  prevention  of  wrongs,  except  in 
so  far  as  its  remedies  may  deter  the  commission 
of  wrongs.  The  law  rarely  defines  what  the 
exact  conduct  of  the  individual  shall  be.  It 
leaves  ways  and  means  to  the  individual,  with 
this  injunction; — that  they  shall  be  such  as  will 
not  result  in  injury  to  others. 

The  great  remedy  of  the  law  for  injuries  is 
damages.  And  until  recently,  such  has  been  and 
still  generally  remains,  the  principle  of  the  law 
governing  the  relations  between  the  railroad  and 
those  who  travel  and  ship  their  goods  by  it.  What 
constitutes  a  railway  is  well  known,  but  the  law 

154 


Attempts  to  Correct  Wrongs      155 

does  not  define  the  specific  means  which  the  rail- 
way shall  employ  in  performing  its  obligations. 
It  says  the  essential  thing  is,  that  the  railway  shall 
safely  carry;  the  employment  of  the  specific 
appliances  by  which  this  is  accomplished  is  left 
to  the  carrier. 

I  would  not  have  it  understood  from  this  that 
legislators  are  indifferent  as  to  the  number  of 
people  who  are  killed  and  injured.  Their  atti- 
tude has  been  rather  that  of  helplessness;  as  one 
should  say:  "I  know  no  way  to  prevent  these 
things.  All  I  can  do  is  to  give  damages  when 
wrongs  have  been  suffered."  The  prevention 
of  accidents  by  law  would  be  the  very  crown 
of  legislative  wisdom,  but  how  can  it  be 
done? 

Now,  in  my  opinion,  this  attitude  of  the  law 
toward  the  railway  in  the  matter  of  accidents,  is 
both  wise  and  unwise.  It  is  wise,  in  that  it  can 
scarcely  be  expected  that  the  ordinary  legislator 
can  know  either  so  soon  or  so  well  as  skilled  rail- 
way men,  what  technical  means  and  appliances 
can  best  be  employed  by  the  railway  to  prevent 
accidents.  It  is  unwise,  in  that  it  assumes  that 
skilled  railway  men  will  employ  the  best  means 
and  appliances  of  which  they  have  knowledge  to 
prevent  accidents.  Naturally  one  would  think 
that  they  would  do  so.  But  they  have  not  done 
it  and  they  are  not  doing  it.  There  are  many 
reasons  for  this  but  the  all-sufficient  one  is,  that 


156  An  American  Transportation  System 

railway  men  do  not  differ  in  this  respect  from 
manufacturers  and  people  in  general.  They  "just 
get  along"  with  what  they  have  been  using  as 
long  as  they  can. 

This  general  attitude  of  slipshodness,  indiffer- 
ence and  penuriousness,  has  been  strengthened 
and  perpetuated  by  another  great  principle  of  the 
law  of  accidents.  It  is  the  boast  of  the  law  that 
there  can  be  no  wrong  without  a  remedy;  but 
that  is  not  the  principle  to  which  I  now  refer. 
The  legal  principle  to  which  I  now  refer  is  quite 
the  opposite  of  that  last  mentioned.  It  might 
almost,  although  not  quite  rightly,  be  stated  thus: 
^There  is  no  wrong  from  which  a  workman  can 
suffer  for  which  he  has  a  remedy.  He  who  works 
where  it  is  dangerous  to  work  assumes  the  risks 
of  the  business.  He  need  not  work  unless  he 
wants  to,  ergo,  if  he  works  he  must  take  upon  him- 
self the  risk  of  being  killed.  Moreover  the  em- 
ployer is  not  bound  to  provide  his  servants  with 
the  best  and  safest  appliances. .  Whatever  appli- 
ances are  provided,  so  long  as  the  servant  knows 
what  they  are,  and  he  is  presumed  to  know 
them,  he  takes  all  the  risks.  Now,  since  the 
overwhelming  majority  of  those  who  are  killed 
and  injured  in  railway  accidents  are  railway 
employees,  and  since  the  railway  is  not  liable  in 
damages  for  injuries  to  employees;  why  go  to 
the  expense,  often  enormous,  of  installing  safe 
appliances?  j 


Attempts  to  Correct  Wrongs      157 

Again,  while  it  is  certainly  true  that  legislators 
do  not  so  soon  or  so  well  as  our  railway  managers 
know  what  methods  and  appliances  are  best  cal- 
culated to  prevent  accidents,  and  therefore  should 
leave  their  adoption  to  the  railways,  yet  obviously 
this  principle  of  legislation  can  have  no  application 
to  such  methods  and  appliances  to  prevent  acci- 
dents as  have  been  known  for  years  to  all  men 
of  even  moderate  intelligence,  and  to  such  methods 
and  appliances  as  have  had  years  of  trial  and 
have  been  found  to  produce  the  desired  result. 
And  this  is  especially  true,  when  it  is  known  that 
the  use  of  such  methods  and  appliances  exactly 
distinguishes  the  safety  of  railway  operation  in 
all  other  countries,  from  its  extreme  dangerousness 
in  this  country.  When  the  railways  of  this  coun- 
try refuse  to  adopt  these  best  methods  and  appli- 
ances to  prevent  accidents,  and  our  legislators 
refuse  to  compel  their  adoption,  their  course  can 
be  characterized  as  nothing  less  than  legislative 
cowardice .^  To  call  it  legislative  conservatism  is 
to  abuse  that  name. 

It  may  be  that  to  the  railway  corporations  it  is 
cheaper  to  take  chances  and  pay  damages  than  to 
make  changes,  but  it  seems  to  me  that  it  would  be 
better  and  cheaper  for  us  to  prevent  as  far  as 
possible,  the  killing  and  maiming  of  these  one 
hundred  thousand  people  every  year,  rather  than 
to  rely  for  our  remedy  upon  the  damages  the  rail- 
ways may  pay;  especially  since  the  railways  must 


158  An  American  Transportation  System 

collect  from  us  the  money  which  they  pay  to  us  for 
killing  and  maiming  us.j 

It  is  my  purpose  to  inquire  what  methods  and 
appliances  our  legislators  have  compelled  our  rail- 
ways to  adopt.  In  short,  to  inquire  what  legisla- 
tion we  have  had  looking  to  the  prevention  of 
accidents  rather  than  to  their  compensation  in 
money  damages. 

Kinds,   classes  and  groups  of  railway  accidents 

The  first  step  in  the  ascertainment  of  the  causes 
of  railway  accidents  is  to  classify  them.  For 
about  twenty  years  past  the  government  has  been 
collecting  information  concerning  these  accidents, 
such  information  being  published  yearly  in  statis- 
tical reports,  which  often  contain  valuable  sug- 
gestions concerning  the  causes  of  these  accidents 
and  the  means  of  their  prevention.  From  such 
information  the  statisticians  have  grouped  railway 
accidents  under  fifteen  headings^  They  have  also 
segregated  casualties  to  employees  from  those  to 
passengers  and  other  persons.  For  the  purposes 
of  this  book  the  government  groupings  are 
adopted,  but  in  the  tables  which  follow  no  segrega- 
ton  of  the  different  classes  of  people  injured  by 
the  same  kind  of  accidents  is  made.  The  first 
table  shows  the  various  kinds  of  accidents  and 
the  percentage  of  each  particular  kind  to  the 
whole  number  of  accidents,  for  the  year  ending 
June  30,  1906,  the  latest  full  report  issued. 


Attempts  to  Correct  Wrongs      159 

Kind  of  accidents  Killed       Injured     Total      o'f  total 

(1)  Coupling  or 

uncoupling.  298  3884         4182         3.86 

(2)  Falling  from 
trains,  locomo- 
tives or  cars  in 

motion.  973  7293         8366         7.72 

(3)  Struck  by 
trains,  locomo- 
tives or  cars  at 
highway  cross- 
ings. 929  1892         2821  1.90 

(4)  Struck  by 
trains,  locomo- 
tives or  cars  at 

other  places.  5563  5304       10,867      10.03 

(5)  Collisions.  658  8383         9041         8.34 

(6)  Derailments.  387  4831         5218         4.80 

(7)  Parting  of 

trains.  20  652  672  .62 

(8)  Locomotives  or 
cars  breaking 

down.  28  352  390  .33 

(9)  Overhead  ob- 
structions. 91  1127         1218  1. 11 

(10)  Jumping  on  or 
off  cars,  trains 
or  locomotives 

in  motion.  766  8916         9682         8.93 

(11)  Handling  traf- 
fic. 13  3072         3085  2.84 

(12)  Handling  tools, 

machinery,  etc.  31  11,885      IIi9I6       11.00 


Carried  forward  9757         57>6oi     67,358      61.48 


160  An  American  Transportation  System 


Kind  of  accidents 

Killed 

Injured 

Total 

.rer  cent, 
of  Total 

Brought  forward 
(13)  Getting  on  or 
off  locomotives 

9757 

57»001 

67,358 

61.48 

or  cars  at  rest. 

8 

1052 

1060 

•97 

(14)  Handling  sup- 
plies. 

14 

598i 

5995 

5-53 

(15)  Other  causes. 

839 
10,618 

33.072 
97,706 

33. 911 
108,324 

3!-30 

Totals 

99.28 

It  will  at  once  be  observed  concerning  the 
above  table,  that  the  accidents  covered  by  classes 
^i-io  inclusive,  are  such  as  are  most  largely  pecu- 
liar to  the  operation  of  railways  .j  Classes  11 -14 
inclusive,  are  not  so  distinctively  peculiar  to  the 
railway  industry.  While  probably  more  numer- 
ous than  in  kindred  industries,  I  think  it  unjust 
to  charge  them  specifically  to  the  railway  account. 
As  to  class  15,  comprising  so  large  a  percentage 
of  the  whole,  it  can  only  be  said  that  the  causes 
are  so  numerous  as  to  render  it  impracticable 
to  deal  with  them  here.  Nor  is  it  necessary 
so  far  as  the  main  argument  is  concerned.  I 
desire  to  give  the  railway  the  benefit  of  every 
possible  doubt,  and  to  eliminate  from  this  terrible 
list  every  accident  with  which  it  may  not  be 
properly  chargeable.  A  considerable  number  of 
accidents  occur  to  persons  alleged  to  be  trespassers 
on  railway  property.  They  are  included  in  the 
above  table.  For  the  purpose  of  doing  full  justice 
to  the  railway,  I  have  prepared  another  table, 


Attempts  to  Correct  Wrongs      161 

made  up  from  the  first  one,  but  in  the  second, 
classes  11-15  inclusive  and  all  accidents  to  tres- 
passers are  eliminated.  This  second  table  is 
as  follows: 


Kind  of  accident 

Killed 

Injured 

Total 

rer  ceni. 
of  total 

(1)     Coupling  or 
uncoupling. 

298 

3884 

4182 

9.92 

(2)     Falling  from 
trains,  locomo- 

tives or  cars  in 

motion 

613 

6617 

7230 

I7-25 

(3)     Struck  by- 
trains,  locomo- 

tives or  cars  at 

highway  cross- 
ings. 

679 

1666 

2345 

5-59 

(4)     Struck  by 

trains,  locomo- 

tives or  cars  at 

other  places. 

1544 

2724 

4268 

10.18 

(5)     Collisions. 

626 

8338 

8964 

21.34 

(6)     Derailments. 

353 

4746 

5099 

12.17 

(7)     Parting  of 
trains. 

IS 

63  5 

650 

i-55 

(8)     Locomotives 

or  cars  break- 

ing down. 

24 

359 

383 

.91 

(9)     Overhead  ob- 

structions. 

91 

1127 

1218 

2.90 

(10)  Jumping  on  or 
off  cars,  trains 

or  locomotives 

in  motion. 

310 

4SS3 

7246 
37,342 

7556 
41,895 

18.03 

Totals 

99.84 

162  An  American  Transportation  System 
Source  of  information  concerning  railway  accidents 

Those  who  have  had  occasion  to  notice  the 
newspaper  reports  of  railway  accidents,  can  not 
have  failed  to  observe  the! mystery  in  which  they 
are  quite  universally  shrouded.  Nor  can  one  often 
get  any  information  from  railway  officials.  Train- 
men and  other  employees  are  always  officially 
dumb.  Turn  to  higher  officials,  and  one  is  always 
put  off  with  no  information  or  misinformation. 
It  is  often  most  difficult  even  to  send  telegrams 
from  stations  near  where  wrecks  have  occurred, 
if  they  contain  any  information  concerning  the 
cause  of  the  disaster.  It  is  something  not  to  be 
talked  about — to  be  hushed  up  and  forgotten  as 
soon  as  possible.  The  only  explanation  which 
the  public  gets  from  the  railway  is  that  the  cause 
of  the  wreck  is  "unknown." 

There  has  never  been  any  federal  law  and  until 
recently,  only  a  few  state  laws,  requiring  an  official 
investigation  of  accidents  on  railways.  The  cus- 
tomary coroner's  inquest,  conducted  by  persons 
having  no  expert  knowledge,  resolves  the  usually 
conflicting  evidence  into  the  usual  verdict,  "that 
the  deceased  came  to  his  death"  etc. — but  fails 
to  place  the  responsibility. 

For  many  years  the  federal  law  has  required 
railway  companies  to  report  to  the  Interstate 
Commerce  Commission  annually,  all  accidents 
which  occur  on  their  respective  roads,  and  since 


Attempts  to  Correct  Wrongs      163 

1 90 1  they  have  been  required  to  make  monthly 
reports  of  all  accidents  to  passengers  and  employ- 
ees. Thus  the  sole  source  of  information  which 
the  public  and  the  government  have  concerning 
railway  accidents,  is  the  railway  itself.  In  other 
words,  railway  officials  furnish  all  the  data  -we 
have  concerning  accidents  and  their  causes. 
Now,  it  is  hardly  to  be  expected  that  one,  having 
a  free  hand,  will  maximize  his  own  derelictions. 
It  is  well  known  that  railway  accidents  frequently 
lead  to 'serious  litigation  against  railways,  result- 
ing in  heavy  damages.  It  requires  a  quite  unex- 
pectedly lofty  conscience  in  a  railway  official  to 
acknowledge  that  his  road  was  in  the  wrong, 
under  such  circumstances.  On  the  contrary, 
giving  them  credit  for  all  the  honesty  and  fairness 
that  could  be  expected,  railway  official  reports 
of  accidents  are  to  be  received  with  grave  sus- 
picions. A  simple  illustration  taken  from  the 
aggregates  of  1906  will  show  the  truth  of  this. 
Of  persons  who  were  neither  passengers  nor  em- 
ployees, there  were  6300  killed  and  9932  injured. 
Of  the  number  killed  5381  were  trespassing  and 
919  were  not  trespassing.  Of  the  number  injured 
5927  were  trespassing  and  4005  were  not  tres- 
passing. In  other  words  £  of  those  killed  were 
trespassing  while  §  of  those  injured  were  not  tres- 
passing. Obviously  dead  men  tell  no  tales. 
The  survivors  served  better  in  the  reports.^ 
But  these  reports  are  not  only  subject  to  grave 


1 64  An  American  Transportation  System 

suspicion  as  to  the  information  they  give,  but  also 
as  to  that  they  omit.  The  commission  endeavors 
to  keep  some  record  of  accidents  as  they  are 
reported  in  the  daily  papers.  The  commission 
reports  the  failure  of  sundry  railroads  to  include 
in  their  sworn  reports  many  accidents,  some  even 
of  most  serious  character,  and  their  attention 
being  called  to  the  fact,  the  only  excuse  is  that 
the  omissions  were  through  oversight.  But  this 
does  not  greatly  strengthen  our  respect  for  their 
accuracy,  especially  as  omissions  of  necessity 
diminish  the  number  of  accidents  which  actually 
occur. 

There  is  another  respect  in  which  these  reports, 
and  hence  all  deductions  from  them,  are  unreliable. 
No  person  is  reported  "killed"  in  a  railroad  acci- 
dent, unless  he  dies  within  twenty-four  hours  of 
its  occurrence.  All  others  are  merely  injured. 
Of  course  it  is  well  known  that  many  a  sufferer 
lingers  more  than  twenty- four  hours.  If  those  who 
die  within  the  90  days  usually  allowed  by  acci- 
dent insurance,  were  added  to  the  list  of  "killed, " 
it  is  not  improbable  that  their  number  would  be 
doubled. 


— i 


Is  there  a  natural  law  of  railway  accidents? 

In  1888  the  railways  were  responsible  for  in- 
juries to  31,170  people;  in  1906  for  108,324. 
What   is   your   interpretation   of   these   figures? 


Attempts  to  Correct  Wrongs      165 

Will  you  say  that  those  who  have  to  do  with  the 
operation  of  our  railway  system,  were  more  than 
three  times  as  negligent  in  1906  as  they  were  in 
1888?  Or  will  you  say  that  our  railways  were 
three  times  safer  in  1888  than  in  1906?  If  you 
came  to  either  of  these  conclusions,  I  think  you 
would  be  greatly  in  error.  What  then  is  the 
correct  interpretation  of  these  figures  ? 

Before  attempting  to  answer  this  very  import- 
ant question,  I  beg  to  impose  upon  you  the  dis- 
agreeable task  of  running  your  eye  down  these 
columns  of  figures  showing  the  number  of  killed 
and  injured  in  railway  accidents  each  year  from 
1888  to  1906. 

Year  Killed  Injured  Total 


1888 

5,282 

25,888 

3I,I7° 

1889 

S.823 

26,309 

32>x32 

1890 

6,335 

29,027 

35.362 

1891 

7,029 

33,88i 

40,910 

1892 

7.M7 

36,652 

43,799 

1893 

7.346 

4o,393 

47,739 

1894 

6,447 

31,889 

38,336 

1895 

6,136 

33-748 

39,884 

1896 

6,448 

38,687 

45,135 

1897 

6,437 

36,73i 

43,i68 

1898 

6,859 

40,882 

47,74i 

1899 

7,"3 

44,620 

5r.743 

1900 

7,865 

5o,32o 

58,185 

1901 

8,455 

53,339 

61,794 

1902 

8,588 

64,662 

73,250 

1903 

9,840 

76,553 

86,393 

1904 

10,046 

84,155 

94,201 

J90S 

9,703 

86,008 

95,7" 

1906 

10,618 

97,7o6 

108,324 

If  there  can  be  found  anything  gratifying  in 
these  columns  what  is  it?     With  deadly  precision 


1 66  An  American  Transportation  System 

the  number  of  casualties  increase  every  year,  ex- 
cept two.  In  1894  the  casualties  decreased  9403 
over  1893.  In  1897  there  was  a  substantial  im- 
provement over  18960  Verily,  it  looked  in  1894 
as  though  we  were  in  the  way  of  conquering  the 
foe  of  traveler  and  employee.  Here  was  a  most 
decided  improvement.  But  0,  beware  of  statis- 
tics! They  are  worse  than  the  traditional  sand 
foundation — heartless,  merciless  deceivers.  The 
truth  is,  what  decreased  were  traffic  and  the 
number  of  employees. 

Obviously  in  comparing  railway  accidents  for 
different  years,  it  is  necessary  to  take  into  account 
other  differences  in  railway  facts  and  conditions 
in  the  years  compared.  Now,  there  are  several 
railway  factors  which  must  always  bear  a  fairly 
constant  ratio  to  one  another  in  different  years, 
else  the  railway  business  is  not  properly  conducted. 
These  may  be  roughly  described  as  the  load 
which  is  delivered  to  the  railway,  the  energy 
expended  in  carrying  the  load  and  the  product 
of  the  expended  energy.  Thus  there  must  exist 
a  fairly  constant  ratio  between  (1),  the  total 
volume  of  railway  traffic;  (2),  the  number  of 
employees ;  (3) ,  the  gross  earnings ;  (4) ,  the  opera- 
ting expenses  and  (5),  the  income  from  operations. 
Unfortunately  railway  accidents  must  also  bear 
a  very  constant  ratio  to  all  these  other  railway 
factors.  They,  too,  are  a  product  of  railway 
operation. 


Attempts  to  Correct  Wrongs      167 

Roughly  speaking,  it  may  be  affirmed  that  rail- 
way accidents  increase  or  decrease  in  proportion 
to  the  number  of  employees  and  the  volume  of 
the  traffic.  Then,  since  the  number  of  employees 
depends  upon  the  volume  of  the  traffic,  you  may 
leave  the  number  of  employees  out  of  considera- 
tion and  simply  say:  Railway  accidents  are  in 
proportion  to  the  volume  of  the  traffic. 

But  you  would  be  very  far  from  having  found 
a  rigid  law  governing  accidents,  because,  while 
the  volume  of  the  traffic  is  the  determining  factor, 
there  are  an  almost  infinite  number  of  other 
factors  ever  causing  variation.  It  would  not  be 
very  far  from  the  truth  if  you  said:  Under 
like  conditions,  railway  accidents  are  in  proportion 
to  the  volume  of  the  traffic.  But  in  no  two  years 
are  the  conditions  the  same,  on  no  two  roads  are 
the  conditions  the  same  and  the  conditions  vary 
on  different  parts  of  the  road  of  the  same  company. 
These  conditions  vary  all  the  way  from  the  greatest 
unsafety  to  the  greatest  possible  safety.  All  that 
the  law  says  is,  that  under  like  conditions  the 
number  and  kinds  of  accidents  will  bear  an  approx- 
imately definite  ratio  to  the  volume  of  the  traffic.j 
But  these  conditions  are  so  well  known  that,  if 
you  knew  the  volume  of  business  that  will  be  done 
in  this  coming  year,  1909,  you  could  on  the  first 
day  of  January  calculate  with  approximate 
accuracy,  the  total  number  of  casualties  that  will 
be  shown  at  the  end  of  the  year,  and  the  total 


1 68  An  American  Transportation  System 

number  of  people  who  will  be  killed  and  injured 
by  each  kind  of  railway  accident. 

But  let  us  not  be  depressed  by  this  showing. 
It  does  not  mean  that  railway  accidents  must 
forever  continue  as  numerous  as  they  have  been 
this  year.  What  the  law  means  is  this,  that, 
even  if  conditions  were  changed  so  as  to  pro- 
duce the  greatest  possible  safety,  still  the  doub- 
ling of  the  volume  of  traffic  would  double  the 
accidents.  If,  for  instance,  it  were  possible  to 
reduce  the  number  of  railway  casualties  this  year 
to  ten  thousand,  then  if  next  year  the  business 
were  to  double,  other  conditions  remaining  the 
same,  we  could  expect  nothing  less  than  twenty 
thousand  casualties. 

Causes    of    railway    accidents    from    the    railway 
standpoint 

Railway  men  know  the  causes  of  railway 
accidents  as  well  as  you  know  the  prominent 
objects  to  be  seen  along  the  road  which  you  have 
traveled  a  thousand  times.  But  they  will  not 
admit  the  underlying,  deep-seated  causes.  They 
will  tell  you  that  they  as  much  expect  railway 
accidents  to  occur  as  they  expect  railways  to  be 
operated,  and  that  they  expect  them  to  regularly 
increase  in  number  in  the  future  as  they  have 
in  the  past.  But  they  will  not  admit  that  there 
is  any  inherent  necessity  for  railway  accidents. 


Attempts  to  Correct  Wrongs      169 

On  the  contrary  they  will  tell  you  that  they  have 
devised  a  set  of  rules  for  the  government  of  rail- 
way operations  which,  if  absolutely  obeyed  by 
railway  employees,  would  render  accidents  practi- 
cally impossible — that  every  accident  implies  a 
blunder,  or  a  wilful  disobedience  of  rules  and 
orders,  on  the  part  of  employees. 

(From  the  railway  standpoint,  the  safety  of 
railway  operations  depends  entirely  upon  the 
care  and  obedience  of  employees,  and  not  in  any 
degree,  or  at  least  in  any  considerable  degree,  upon 
the  appliances  used.  (  And  to  clinch  the  argument, 
they  will  tell  you,  and  it  is  the  fact,  that  a  poorly 
constructed  and  equipped  road  may  be  operated 
for  a  considerable  period  without  an  accident, 
while  a  calamity  may  occur  on  the  best  built, 
double-tracked  road,  having  the  most  improved 
equipment  and  guarded  by  every  safety  device 
which  ingenuity  has  invented.  And,  therefore, 
railway  managers  are,  for  the  most]  part,  opposed 
to  legislation  requiring  them  to  use  devices  cal- 
culated to  lessen  the  dangerousness  of  railway 
operation.  What  is  required,  they  say,  is  greater 
care,  greater  obedience  and  greater  discipline 
on  the  part  of  the  employees. 

But  railway  managers  overlook  the  necessary 
implications  of  their  arguments.  They  I  overlook 
the  all-important  fact  that  notwithstanding  the 
perfection  of  their  rules,  orders  and  regulations, 
accidents  do  happen  and  therefore,  that  these 


170  An  American  Transportation  System 

rules,  orders  and  regulations  are  not  in  and  of 
themselves  preventive  of  accidents.  From  some 
cause  they  do  not  accomplish  what  they  are  in- 
tended to  accomplish.  And  as  to  accidents  on 
poorly  constructed,  guarded  and  equipped  roads, 
the  able  antagonists  of  preventive  legislation 
overlook  the  further  all-important  fact,  that  if 
traffic  were  as  heavy  on  such  roads  as  it  is  on 
first  class  roads,  the  occurrence  of  accidents 
would  he  a  continuous  performance.  And,  there- 
fore, the  question  is:  What  should  be  done  to 
prevent  accidents  when  and  where  real  railways 
are  operated  under  conditions  most  likely  to  be 
productive  of  accidents ;  that  is,  where  real  rail- 
ways are  operated  to  the  full  limit  of  expedition, 
capacity  and  efficiency  ? 

Thus  the  rock  upon  which  the  railway  managers 
and  those  who  favor  preventive  legislation  split 
is  exactly  this:  \  Shall  we  depend  for  greater 
safety  upon  exacting  still  greater  care  from 
railway  employees,  both  for  their  own  safety 
and  the  safety  of  the  public,  or  shall  we  depend 
upon  the  compulsory  adoption  of  appliances 
which  remove  the  necessity  of  such  great  care 
on  the  part  of  employees?  In  other  words,rshall 
we  make  the  railway  inherently  safe,  or  as  safe 
as  possible,  independently  of  the  care  of  the 
employees.  ,  This  is  a  question  not  so  entirely 
easy  of  solution  as  you  might  think.  Broadly 
speaking  any  one  will  say:     If  I  may  surround 


Attempts  to  Correct  Wrongs      171 

myself  with  appliances  whereby  I  may  do  a  dan- 
gerous act  with  entire  safety,  it  is  better  that  I 
do  so,  than  depend  upon  the  constant  exercise 
of  nerve-racking  care.  It  is  better  to  cross  a 
stream  on  a  bridge  than  on  a  log,  notwithstanding 
the  latter  method  requires  great  caution  and  the 
former  none.  But  we  must  not  overlook  the 
important  fact  that  it  is  not  entirely  in  the  inter- 
est of  human  progress  that  men  should  be  turned 
into  automatons.  What  consoles  me  in  this 
regard  is,  that  when  we  shall  have  surrounded 
railway  operations  with  all  the  safety  appliances — 
automatic  and  other — which  may  be  invented, 
such  operations  will  remain  so  inherently  danger- 
ous that  care,  of  the  proper  kind,  will  still  be  in 
ample  demand. 

When  the  admiration  which  I  feel  for  this 
great  instrument  of  human  progress  is  considered, 
and  when  it  is  further  understood  how  deep  is 
my  shame  at  its  disgraceful  record  as  a  destroyer 
of  human  life  as  compared  with  records  of  the 
railways  of  other  countries,  it  is  quite  probable 
that  I  shall  be  accused  of  exaggerating  the  impor- 
tance of  railway  safety  and  of  suggesting  imprac- 
ticable remedies. 

Always  we  are  jammed  back  against  the  pillar 
of  cost.  If  we  could  bring  about  safety,  or  even 
greater  safety  than  we  now  have,  would  the 
benefit  be  commensurate  with  the  cost?  Well 
for  the  moment  I  am  going  to  ignore  the  question 


172  An  American  Transportation  System 

of  cost;  and  those  who  are  bored  by  the  subject 
may  turn  to  something  more  interesting. 

Accidents  caused  by  coupling  or  uncoupling  cars 

Under  the  old  system,  as  railroading  grew  up, 
the  duty  of  putting  cars  together  to  form  trains 
and  of  detaching  cars  in  breaking  up  trains, 
most  largely  devolved  on  the  class  of  employees 
known  as^brakemen,  their  labors  being  supple- 
mented by  other  trainmen  and  by  switchmen, 
yardmen,, etc.  Under  the  old  system,  the  uniform 
method  of  attaching  cars  together  was  by  link 
and  pin.  As  these  coupling  appliances  were 
situated  in  the  middle  of  the  end  of  the  cars,  it 
followed  that  whenever  cars  were  to  be  coupled 
or  uncoupled,  it  was  necessary  for  the  employee 
to  go  in  between  the  cars,  generally  in  motion, 
and  with  his  hands  adjust  the  link  and  pin.  This 
was  very  dangerous,  and  the  danger  was  accen- 
tuated by  the  fact  that  the  draw  bars  of  all  cars 
were  not  at  a  uniform  height  from  the  ground, 
the  difficulty  of  making  the  attachment  or  detach- 
ment being  thereby  increased.  In  1893,  when 
the  link  and  pin  style  of  coupling  was  most  largely 
in  vogue,  11,710  employees  were  killed  or  injured 
while  engaged  in  coupling  or  uncoupling  cars. 

Inventive  genius,  ever  philanthropic,  has  long 
tried  to  come  between  the  trainman  and  his 
dangers.  Concerning  the  coupling  and  uncoupling 
of  cars  it  is  said :     "I  will  make  an  appliance  by 


Attempts  to  Correct  Wrongs      173 

which  cars  will  automatically  couple  when  they 
are  jammed  together,  and  be  uncoupled  by  a 
lever,  so  that  trainmen  will- not  have  to  go  between 
them."  And  genius  made  this  invention.  Rail- 
way f  managers  ever  looking  at  "cost,"  and  ever 
relying  upon  their  ancient  maxim,  that  no  accident 
could  happen  if  employees  obeyed  rules,  etc., 
have  ever  shied  at  the  inventions  of  genius. 
Legislators,  ever  most  conservative  where  wealth 
is  on  one  side  and  mere  human  life  on  the  other, 
have  ever  promised,  investigated,  temporized, 
compromised  and  postponed  as  long  as  they 
could  do  so  and  hold  their  jobs.  Hence  it  was  not 
until  1893,  when  pressure  from  all  sides  could  no 
longer  be  resisted,  that  congress  enacted  a  law 
requiring  that  draw  bars  should  be  of  uniform 
height,  and  that  all  interstate  railways  should 
adopt  and  use  this  automatic  coupler.  The 
railways  were  given  ample  time  in  which  to 
make  the  necessary  changes  in  their  rolling  stock, 
but  it  was  not  until  1900  that  it  could  be  said 
that  automatic  couplers  were  in  universal  use. 
Before  the  passage  of  the  law,  practically  all 
passenger  cars  were  already  equipped  with  auto- 
matic couplers,  but  only  2\  per  cent  of  locomotives 
and  16 \  per  cent  of  freight  cars  were  so  equipped. 
The  effect  of  this  law  in  the  prevention  of  accidents 
from  coupling  and  uncoupling  cars,  as  the  auto- 
matic coupler  came  more  and  more  into  use  each 
year,  may  be  seen  in  the  following  table. 


174  An  American  Transportation  System 

Year        Killed        Injured  Total 


1893 

433 

11,277 

11,710 

1894 

251 

7,240 

7,49i 

189s 

291 

8,i37 

8,428 

1896 

229 

8,457 

8,686 

1897 

214 

6,283 

6,497 

1898 

279 

6,988 

7,267 

1899 

260 

6,765 

7,°25 

1900 

282 

5«229 

5,5n 

1901 

198 

2,768 

2,966 

1902 

167 

2,864 

3,<>3i 

1903 

281 

3.551 

3,832 

1904 

3°7 

4,019 

4,326 

1905 

230 

3,543 

3,773 

1906 

298 

3,884 

4,182 

This  table  speaks  partly  for  itself,  but  it  speaks 
with  mighty  voice  when  to  it  you  apply  the 
approximate  law  of  railway  accidents  as  above 
explained.  ^Since  1901,  the  first  full  year  reported 
in  which  the  automatic  coupler  was  in  universal 
use  on  freight  trains,  the  volume  of  traffic  greatly 
increased  and,  therefore,  notwithstanding  its  use, 
accidents  from  this  cause  might  be  expected  to 
increase,  as  they  did. ,  But  if  the  "like  conditions  " 
had  existed  in  1906  as  in  1893,  the  world  would 
have  been  appalled  at  the  slaughter  record  of 
1906.  For  from  1893  to  1906  the  volume  of 
railway  traffic  more  than  doubled.  Therefore, 
had  "like  conditions"  existed  in  1906,  that  is, 
had  coupling  been  done  in  that  year  by  link  and 
pin,  the  number  of  employees  killed  and  injured 
"in  coupling  and  uncoupling"  in  1906,  would 
have  exceeded  2  3, 000,  as  certainly  as  railway 
operations  had  been  carried  on! 

Now  why  is  it  that  employees  are  still  killed 


Attempts  to  Correct  Wrongs      175 

and  injured,  notwithstanding  the  universal  em- 
ployment of  the  automatic  coupler?  Theoreti- 
cally, a  man  need  never  go  between  the  cars 
when  this  device  is  used.  Actually,  he  often 
has  to  do  so  and  is  crushed.  This  is  in  no  sense 
the  fault  of  the  coupler.  It  is  not  because  it  is 
used,  but  because  it  is  abused.  A  considerable 
percentage  of  couplers  are  retained  in  use  when 
they  are  worn  out  or  are  out  of  order.  The 
same  penuriousness  which  declined  their  use 
originally,  continues  them  in  use  when  they  should 
be  in  the  scrap  heaps  or  the  repair  shop.  When 
men  have  to  go  between  the  cars  to  operate  an 
out-of-order  automatic  coupler,  it  is  probably 
more  dangerous  than  under  the  old  link  and  pin 
regime,  most  likely  because  the  engineer  depend- 
ing upon  the  automatic  coupler  working  as  it 
should,  is  less  careful  in  controlling  his  train. 
The  law  should  impose  heavy  penalties  for  the 
use  of  couplers,  or,  for  that  matter,  any  other 
appliance,  when  not  in  good  order. 

Accidents  caused   by  falling  from  locomotives   or 
cars  when  in  motion 

This  is  not  only  one  of  the  most  fruitful  causes 
of  railway  accidents,  but  one  of  the  most  difficult 
to  deal  with.  Taken  in  connection  with  its 
kindred  cause,  "falling  from  engines  and  cars 
while  getting  on  or  off,"  it  was  responsible  for 
973  deaths  and  7293  injuries  to  passengers  and 


176  An  American  Transportation  System 

employees  in  the  year  1906.J  As  a  cause  of  railway 
accidents  it  is  to  be  distinguished  from  "jumping 
on  or  off  cars  etc.  while  in  motion,"  which  will 
be  reviewed  later. 

Let  us  first  look  at  the  matter  as  a  cause  of 
injury  to  employees.  Under  the  old  system  of 
railroading,  before  the  invention  of  the  air-brake, 
the  speed  of  trains  was  controlled  by  means  of 
hand  brakes,  which,  in  the  case  of  box  cars, 
stuck  up  above  the  end  of  the  car.  At  that  time 
the  residence  of  the  brakeman  when  the  train 
was  in  motion,  was  most  largely  on  top  of  the 
cars,  where  he  was  expected  at  all  times,  to  be 
able  to  control  the  speed  of  the  train  by  means 
of  the  hand  brake.  This  occupation  made  him 
quite  a  sprinting,  hurdle  jumping,  space  leaping, 
brake  setting  and  unsetting  athlete.  For  no 
time  was  to  be  lost.  Often  he  had  to  go  at  break- 
neck speed,  jumping  from  car  to  car,  setting 
brakes  as  he  ran.  And  when  you  remember 
that  this  had  to  be  done  at  night  as  well  as  in  day- 
light, with  cars  often  covered  with  sleet  and  with 
absolutely  nothing  to  protect  him  from  falling 
except  the  security  of  his  own  feet,  it  is  not  wonderful 
that  thousands  were  killed  or  injured  every  year. 

Then  came  the  invention  of  the  air-brake. 
The  home  of  the  trainman  was  no  longer  to  be 
on  top  of  the  train.  The  speed  of  the  train  was 
to  be  under  the  control  of  the  engineman  in  his 
cab :  no  more  falling  from  moving  trains.     Blessed 


Attempts  to  Correct  Wrongs      177 

invention,  from  which  so  much  was  expected, 
and,  so  far  as  the  safety  of  employee  is  concerned, 
so  little,  I  fear,  realised ! 

In  1893  congress  enacted  a  law,  making  it 
unlawful  for  any  interstate  railway  after  1898, 
to  use  any  locomotive  "not  equipped  with  a 
power  driving-wheel  brake  and  appliance  for 
operating  the  train-brake  system,  or  to  run  any 
train  .  .  .  that  has  not  a  sufficient  number  of 
cars  in  it  so  equipped  with  power  or  train  brakes 
that  the  engineer  on  the  locomotive  drawing  such 
train  can  control  its  speed  without  requiring 
brakemen  to  use  the  common  hand  brake  for  the 
purpose,  j  Here  was  a  law  apparently  clear  in 
its  purpose  to  do  away  entirely  with  the  necessity 
of  hand  brakes;  hence  to  do  away  entirely  with 
the  necessity  of  brakemen  going  about  on  the 
tops  of  moving  trains;  hence  to  do  away  with 
"falling"  from  that  cause,  at  least.  At  the  time 
of  the  enactment  of  this  law,  about  three-fourths 
of  freight  engines  were  equipped  as  required  and 
less  than  one-fifth  of  freight  cars,  while  in  the 
passenger  service  train  brakes  were  then  univer- 
sally used.  The  things  which  this  law  required 
were,  therefore,  not  novelties. 

There  are  two  ways  of  judging  the  effect  of  a 
law  of  this  kind.  The  first  is  by  examining  the 
record  of  killed  and  injured  since  its  adoption. 
Let  us  first  see  what  this  record  shows. 

Table  showing  killed  and   injured  by  falling 


178  An  American  Transportation  System 

from  locomotives  and  cars  in  motion,  and  percent- 
age of  equipment  using  train  brakes  1893-1906. 


Year 

Killed 

Injured 

Total 

Per  cent,  of  equipment 
using  train  brakes. 

1893 

644 

378o 

4424 

22 

1894 

439 

2869 

33o8 

25 

1895 

452 

3297 

3749 

27 

1896 

472 

3898 

437o 

34 

1897 

408 

3627 

403S 

39 

1898 

473 

3857 

4332 

47 

1899 

459 

397o 

4429 

57 

1900 

529 

4425 

4954 

70 

1901 

881 

493° 

58-i 

73 

1902 

903 

5675 

6577 

77 

1903 

1063 

6443 

75o6 

81 

1904 

969 

6771 

7740 

83 

i9°S 

906 

6439 

7345 

86 

1906 

973 

7293 

8266 

90 

In  the  above  table  the  figures  represent  the 
total  number  of  all  classes  of  persons — passengers, 
employees  and  trespassers — killed  and  injured. 
In  the  table  on  page  161  the  trespassers  are  not  in- 
cluded,  which  will   account   for  the   difference. 

Two  facts  appear  prominently  from  this  table: 
(1),  that  the  percentage  of  cars  on  which  train 
brakes  were  employed  increased  from  22%  in 
1893  to  90%  in  1906;  (2),  that  the  total  number 
of  casualties  from  this  cause  has  nearly  doubled 
in  the  same  time.  Applying  the  law  of  railway 
accidents,  we  should  have  expected,  had  the 
conditions  of  1906  been  the  same  as  in  1893,  that 
the  number  of  accidents  would  have  at  least 
doubled  with  the  doubling  of  the  volume  of  traffic. 
They  have  nearly  doubled  notwithstanding  the 
changed  condition — the  use  of  the  train  brake. 


Attempts  to  Correct  Wrongs      179 

Accidents  of  the  kind  included  in  this  class  have 
not  diminished  as  they  should  have  done.  Why 
is  this  so? 

Here  is  an  appliance  whereby,  theoretically, 
the  engineman  entirely  controls  his  train,  without 
the  necessity  of  trainmen  on  the  tops  of  cars 
using  the  hand  brake.  And  here  is  a  law  impera- 
tively prohibiting  the  running  of  any  train 
"that  has  not  a  sufficient  number  of  cars  in  it  so 
equipped  with  power  or  train  brakes  that  the 
engineer  on  the  locomotive  drawing  such  train  can 
control  its  speed  without  requiring  brakemen  to 
use  the  common  hand  brake  for  that  purpose."  Yet 
notwithstanding  the  invention,  and  notwithstand- 
ing the  law,  the  accidents  which  they  were  in- 
tended to  prevent  have  been  nearly  as  common 
as  they  were  before  the  invention  and  before 
the  law.  Again  I  ask :  why  is  this  so  ?  And  the 
answers  are  many. 

1 . — The  law  itself  afforded  the  loophole  through 
which  the  railways  could  evade  it. 

2. — The  railways  have  not  obeyed  the  law 
either  in  its  letter  or  spirit. 

3. — The  railways  have  not  been  compelled  to 
obey  the  law. 

4. — The  railways  have  used  the  train  brake 
appliances  when  they  were  out  of  order. 

5. — The  railways  have  either  not  fully  instructed 
their  employees  how  to  properly  use  the  train 
brake,  or  have  employed  men  inexperienced  in 


180  An  American  Transportation  System 

its  use,  so  that  employees  have  not  full  confidence 
in  its  efficiency. 

6. — In  order  to  save  employees  from  falling  off 
cars,  other  safety  appliances  must  supplement 
£_  the  train  brake. 

The  loophole  through  which  the  railways  were 
enabled  to  evade  the  law  was  plain.  The  law 
provided  that  the  railways  should  use  "a  suf- 
ficient number  of  cars"  so  equipped  as  to  ac- 
complish the  desired  end.  But  it  practically  left 
it  to  the  railways  to  say  what  number  of  cars 
in  a  train  so  equipped,  would  be  sufficient.  Was 
it  a  quarter  of  the  number  of  the  train,  half  the 
number,  three-fourths  the  number,  or  all?  This 
was  left  to  the  railways  to  determine.  Now  rail- 
way men  and,  I  presume,  congressmen  knew  then 
as  they  have  known  ever  since,  that,  as  a  safety 
appliance,  nothing  short  of  the  equipment  of 
every  car  in  a  train  would  accomplish  the  purpose. 
Indeed  it  is^  more  dangerous  to  employees  to  work 
a  train  partly  equipped  with  power  brakes,  than 
one  wholly  equipped  with  hand  brakes.  In  case  of 
the  sudden  application  of  the  air  to  a  train  partly 
equipped  with  power  brakes,  the  unequipped 
portion  is  suddenly  jammed  upon  the  equipped 
portion  with  such  force,  that  a  trainman  on  top 
of  a  car  must  be  tied  on  to  keep  from  being  thrown 
off.  The  "sufncient-number-of-cars"  part  of  the 
law  practically  nullified  its  useful  part.  It  was 
the   congressional   sop  thrown   to   the   railways. 


Attempts  to  Correct  Wrongs      181 

Again  it  was  a !  question  of  "cost."  And  again 
pressure  was  brought  to  bear  upon  congress,  and 
in  1903  it  amended  its  law  by  providing  that  not 
less  than  50%  of  cars  in  a  train  should  be  equipped 
with  power  brakes,  and  further  provided  that  the 
Interstate  Commerce  Commission  might  increase 
this  minimum.  Accordingly  in  1905  the  mini- 
mum number  was  increased  to  75%^ and  probably 
by  the  end  of  this  century,  if  the  railroads  consent 
to  it,  they  may  be  required  to  equip  every  car  in  a 
train  in  a  uniform  manner  and  with  power  brakes. 
Now,  look  at  this  matter  fairly  and  squarely. 
There  was  not  an  argument,  except  the  con- 
venience of  the  railway  companies,  more  potent 
in  1905  than  in  1903  or  1893,  requiring  all  or  a 
fixed  percentage  of  cars,  to  be  power  braked. 
If  it  was  right  in  1905,  it  was  equally  right  in 
1903  or  in  1893.  What  then  has  prevented  the 
making  and  enforcing  of  a  law  on  this  subject 
which  would  accomplish  what  it  pretends  to 
accomplish?  What,  indeed,  except  that  potent 
hand  which  in  the  end  always  writes  our  laws. 
As  for  their  administration,  it 'bows  to  the  con- 
venience of  the  railways. }  As  one  might  say: 
"When  it  suits  your  convenience  let  us  know, 
and  we  will  make  a  law  requiring  you  to  power- 
brake  80%  of  the  cars  in  a  train,  and  so  on. 
However  unreasonable  you  may  be,  rest  assured 
we  will  never  do  anything  which  will  be  unreason- 
able to  you." 


1 82  An  American  Transportation  System 

But  not  only  has  the  air-brake  as  a  safety 
appliance,  not  had  a  fair  chance  before  the  law; 
it  has  not  had  a  fair  chance  in  actual  operation. 
To  record  all  the  complaints  against  its  misuse 
would  unnecessarily  prolong  the  subject.  As  in 
the  case  of  the  automatic  coupler,  so  with  the 
train-brake  system,  the f  parsimonious,  get-along- 
with-what-you-have  way  of  doing  things  has 
characterized  its  use.  The  reports  of  inspectors 
are  full  of  instances  of  the  continued  use  of  old, 
worn  out  or  badly  repaired  air  appliances,  or  of 
appliances  which  have  been  used  so  long  without 
examination  that  they  cannot  be  depended  on; 
of  engineers  inexperienced,  or  not  sufficiently 
instructed  in  the  use  of  power  brakes,  etc.,  etc. 
As  usual  all  accidents  are  laid  to  negligence  of 
employees.  But  the  truth  is,  nine-tenths  of  the 
accidents  which  come  from  the  use  of  defective 
appliances,  may  be  laid  at  the  door  of  railway 
parsimony. 

Still  if  every  train  were  fully  equipped  with 
power  brakes,  that  would  not  entirely  prevent 
accidents  of  the  character  we  are  now  considering. 
For  the  time  never  has  been  and  never  will  be, 
when  the  power  brake  can  entirely  supersede 
the  hand  brake.  The  latter  must  always  be 
relied  upon  in  emergencies,  and,  of  course,  there 
are  certain  circumstances  in  which  it  only  can  be 
used.  Notwithstanding  this  obvious  fact,  the 
complaint  is  general  that  the  railways  are  grad- 


Attempts  to  Correct  Wrongs      183 

ually  allowing  hand  brakes  to  fall  into  bad  condi- 
tion so  that  many  serious  accidents  result,  when 
employees  are  called  upon  to  use  them.  Certainly 
nothing  short  of  the  maintenance  of  both  power 
and  hand  brakes  in  their  highest  state  of  efficiency, 
will  answer. 

After  all  is  said  that  may  be  said  in  favor  of  the 
air-brake  as  an  appliance  calculated  to  prevent 
accidents  to  employees  caused  by  falling  from 
cars,  it  must  be  admitted  that  it  cannot  be  de- 
pended on  to  accomplish  that  desirable  end.  This 
is  not  to  say  anything  against  the  air-brake  as  a 
preventive  of  accidents  from  other  causes.  It 
must  not  be  forgotten,  that  we  are  now  considering 
it  entirely  as  a  preventive  of  accidents  caused  by 
falling  from  cars  in  motion,  and  more  specifically 
still, as  a  preventive  of  such  accidents  to  employees. 
Of  course  if  it  could  fulfill  its  theoretical  function 
of  the  absolute  control  of  the  train  by  the  engine- 
man,  it  would  be  perfection.  But  the  simple 
truth  is  it  does  not  do  so.  Indeed  it  can  scarcely 
be  doubted  that  it  is,  in  a  certain  sense,  an  added 
source  of  danger.  The  sudden  application  of  the 
air  without  warning — and  often  there  is  no  time 
for  warning — is  well  calculated  to  knock  a  man 
off  a  car.  The  most  that  may  be  said  for  it  is,  that 
generally  it  works  so  well  as  not  to  require  the 
employee  to  be  so  frequently  exposed  to  danger; 
but,  on  the  other  hand,  it  probably  increases 
his  danger  when  he  is  exposed  to  it.     So  long  as 


184  An  American  Transportation  System 

men  must  go  on  top  of  moving  trains,  so  long  as 
they  must  climb  up  and  down  the  ends  and  sides 
of  moving  cars;  just  so  long  will  they  be  killed 
and  injured  unless  they  have  something  to  hold 
on  to,  something  they  may  catch  hold  of  in  case 
of  a  misstep  or  sudden  and  unexpected  jolt. 

It  is  unnecessary  for  me  to  say  that  I  am  no 
mechanical  technicist,  but  only  common  sense 
is  necessary  to  teach  one  that  in  a  dangerous, 
dizzy,  place,  something  substantial  to  hold  on 
to  is  a  good  thing  to  have  at  hand.  This  is  called 
up  by  the  fact  that,  while  the  compulsory  use 
of  the  uniform  drawbar,  the  automatic  coupler 
and  the  train  brake,  have  been  of  great  benefit 
in  preventing  accidents  of  various  kinds;  there 
were  sundry  other  safety  appliances  only  second- 
ary in  importance,  which  congress  has  refused 
to  compel  the  railways  to  adopt,  notwithstanding 
it  has  been  frequently  urged  to  do  so.  Congress 
did,  indeed,  compel  the  railways  to  put  handholds 
or  grab  irons  in  the  ends  and  sides  of  each  car, 
for  "greater  security  to  men  in  coupling  and 
uncoupling  cars";  but  why  it  should  have  com- 
pelled the  use  of  these,  and  refused  to  compel 
the  use  of  sundry  other  appliances  for  the  greater 
security  of  employees,  when  these  were  recom- 
mended by  the  highest  technical  authorities, 
is  beyond  my  power  to  comprehend. 

Perhaps  congress  believed  that  these  other 
appliances  would  be  adopted  and  kept  in  good 


Attempts  to  Correct  Wrongs      185 

order  by  the  railways  voluntarily.  But  the 
evidence  comes  to  us  from  all  directions  that  the 
railways  are  notoriously  neglectful,  either  in 
adopting  or  keeping  in  good  order,  any  appliances, 
if  there  is  not  a  penalty  attached  to  their  failure 
to  do  so.  To  set  these  forth,  would  be  to  go 
further  into  the  details  of  car  construction  than 
I  care  to  go.  For  the  most  part  they  are  com- 
paratively inexpensive  contrivances;  but,  you 
see,  if  they  get  out  of  order,  it  may  be  necessary 
to  take  the  car  temporarily  out  of  service.  The 
general  principle  upon  which  the  railway  cor- 
poration goes  is  this:  have  just  as  few  things  as 
possible  about  a  car  that  can  get  out  of  order, 
and  let  the  employees  take  care  of  themselves. 

Injuries  to  passengers  caused  by  falling  from  cars 

In  the  year  1906  there  were  146  passengers 
killed  and  2044  injured  by  falling  from  cars 
while  getting  on  or  off.  Bear  in  mind,  that  we 
are  not  now  considering  that  foolish  class  of 
people  who  jump  on  and  off  cars  while  in  motion, 
but  only  that  class  who  are  injured  while,  pre- 
sumably, doing  their  best  to  get  on  and  off  our 
passenger  cars.  Now  it  is  quite  likely  that  the 
majority  of  passengers  who  are  injured  in  this 
way,  are  the  old,  the  infirm,  and  women  and  child- 
ren. But  it  must  not  be  forgotten  that  it  is  as 
much  the  duty  of  the  railway  to  provide  safety 


1 86  An  American  Transportation  System 

for  this  class  as  for  athletes,  and  that  they  need 
it  much  more. 

Any  one  who  has  traveled  knows  only  too  well, 
what  it  means  to  climb  up  and  down  the  steep 
steps  of  our  cars,  when  one  is  often  well  loaded 
with  the  paraphernalia  of  travel;  and  especially 
every  one  knows  the  dread  of  that  last  and  final 
step  into  space.  Well,  the  overwhelming  major- 
ity of  accidents  to  passengers  caused  by  falling 
from  cars,  is  exactly  due  to  the  miserable  means 
which  the  railway  provides  for  its  passengers 
to  get  on  and  off.  When,  in  addition  to  the 
inherent  difficulty  of  getting  up  and  down  the 
steps,  it  is  remembered  that  the  landing  places 
are  often  (generally)  poorly  lighted,  sometimes 
only  by  the  lantern  of  an  employee;  the  wonder 
is  that  not  twenty-two  hundred  were  injured, 
but  that  it  was  not  twenty -two  thousand.  Indeed 
it  cannot  be  doubted,  that  thousands  every  year 
receive  from  this  cause,  minor  injuries,  while 
millions  suffer  serious  and  unnecessary  annoyance 
and  inconvenience.  And  there  is  no  earthly 
excuse  for  all  this,  except  the  one  of  "cost." 
This  may  be  proven  by  a  simple  illustration. 
If  I  am  not  mistaken,  the  New  York  City  Subway 
and  Elevated  carry  more  than  half  as  many 
passengers  every  year  as  all  the  rest  of  the  railways 
.  of  the  United  States  together.  Yet  as  far  as 
my  memory  serves,  there  has  never  been  a  serious 
accident   caused    by   a   passenger    falling   while 


Attempts  to  Correct  Wrongs     187 

getting  on  or  off  the  cars.  Why?  Simply  be- 
cause the  platform  of  the  car  is  on  a  level  with 
the  platform  of  the  station.  You  walk  directly 
from  the  platform  of  the  station  onto  the  platform 
of  the  car  and  vice  versa.  Why  should  not  the 
people  who  travel  by  our  steam  roads  have  the 
benefit  of  this  simple  safety  device  ?  Why,  indeed  ? 
Simply  because  it  would  cost  the  railways  some- 
thing more  than  it  does  to  pay  for  killing  and  in- 
juring people  by  the  present  method  of  handling 
them,  and  it  would  inconvenience  the  railway  in 
its  inspection  of  cars,  etc.,  at  stations. 

Would  that  I  might  use  some  prohibited  words. 
Instead,  let  me  ask  you  this:  for  what  does  the 
railway  exist  but  for  the  comfort  and  convenience 
of  the  people?  It  was  born  to  serve  them,  not 
to  slaughter  them.  The  safety  which  money  can 
buy  is  the  best  investment  that  can  be  made. 
And  besides,  at  present  I  am,  in  my  feeble  way, 
simply  trying  to  point  the  way  to  safety.  Later 
on  we  will  discuss  the  matter  of  "cost."  Nor 
do  I  mean  to  suggest  that  car  steps  as  at  present 
used,  should  be  dispensed  with.  On  the  contrary 
they  should  be  retained  for  emergency  use.  But 
if  there  is  any  well  founded  reason  why  all  pas- 
senger coaches  should  not  be  equipped  with  the 
movable  platform  over  the  steps,  as  the  best 
coaches  now  are,  and  why  passengers  should  not 
be  allowed  to  pass  directly  from  the  platform 
onto  a  station  platform  and,  where  necessary, 


1 88  An  American  Transportation  System 

descend  from  it  by  easy  steps,  I  am  unable  to 
imagine  what  that  well  founded  reason  is. 
Besides,  while  I  am  not  squandering  much  sym- 
pathy on  them,  it  would  at  least  prevent  the 
fools  who  try  to  jump  on  and  off  cars  while  in 
motion,  from  tumbling  under  the  cars. 

We  have  now  passed  over  and  beyond  the 
boundary  of  legislative  attempts  to  compel  the 
railways  to  use  means  to  prevent  accidents. 
For  the  most  part  the  balance  of  the  page  is 
blank.  Nevertheless,  there  is  not  the  slightest 
doubt,  that  there  are  thousands  of  people  killed 
and  injured  every  year  and  millions  of  property 
destroyed,  Which  injury  and  destruction  might 
be  prevented,  if  the  railways  would  voluntarily 
employ  the  proper  means,  or  if  the  legislature 
would  compel  their  use. 

Accidents  at  highway  crossings 

Of  all  the  injuries  sustained  by  a  long  suffering 
public  at  the  hands  of  the  railway,  there  are  none 
so  absolutely  without  justification,  as  those  caused 
by  locomotives,  trains  and  cars  striking  people 
and  vehicles  at  highway  crossings.  I  say  this 
because  there  is  one  absolutely  certain  and  one 
fairly  sure  preventive  of  such  accidents,  and  both 
are  entirely  under  the  control  of  the  railroads, 
involving  merely  a  question  of  "cost." 

If  there  is  a  railway  and  a  highway  that  cross 


Attempts  to  Correct  Wrongs      189 

each  other  at  the  same  level  in  England,  I  have 
never  seen  the  place.  Nor  would  such  a  thing  be 
tolerated,  more  than  one  would  be  allowed  to 
maintain  death  traps  in  a  highway.  That  is  the 
sure  prevention  of  highway  crossing  accidents — 
to  have  the  railway  go  either  under  or  over  the 
highway.  Then  both  could  be  used  without  acci- 
dents or  the  fear  of  them.  But,  great  heavens, 
think  of  the  "cost"!  That  is  it:  allow  a  railway 
to  increase  its  liabilities  $31,000,000,  merely  by 
writing  a  resolution  for  a  "stock  dividend"; 
but  dream  not  of  compelling  it  to  incur  one-third 
that  debt  to  make  every  one  of  its  crossings 
safe !     How  truly  American ! 

Even  on  the  most  miserable  road  of  the  most 
miserable  country,  of  the  most  miserable  people 
in  the  civilized  world,  no  railroad  crosses  a  wagon 
road,  save  it  keep,  day  and  night,  a  flagman  who 
lowers  bars  across  the  highway  before  any  train 
gets  within  a  mile  of  it  and  keeps  the  bars  down 
until  after  the  train  has  passed.  In  the  great 
city  of  Philadelphia  in  the  United  States  of 
America,  there  are  miles  of  railway  tracks  over 
which  thousands  of  vehicles  and  street  cars  pass 
every  day,  with  no  protection  from  destruction 
except  eternal  watchfulness.  Yes,  and  in  the 
Imperial  City  itself,  who  is  there  that  does  not 
know  of  the  death  trap  where  the  railroad  crosses 
Eleventh  Avenue?  The  name  of  the  miserable, 
poverty-stricken,  country,  I  do  not  care  to  men- 


190  An  American  Transportation  System 

tion,  but  the  name  of  the  other  country  is  known 
throughout  the  world  for  its  magnificence,  its 
luxury,  its  boasting  and  its  multi-millionaire 
railway  magnates. 

In  1906  there  were  929  people  killed  and  1892 
injured,  because  the  railways  were  required  to 
protect  people  on  the  highways  by  no  better 
means  than  the  old  sign:  "Look  out  for  the 
engine  when  you  hear  it  whistle."  Oh,  most 
generous  America,  how  considerate  you  are  of 
your  people — no  your  railways!  And  of  these 
killed  and  injured  at  highway  crossings,  250  of 
the  killed  and  226  of  the  injured,  the  railways 
report  as  trespassing.  Passing  the  question  how 
a  person  on  the  common  highway  could  be  a 
trespasser  on  railway  property,  attention  is  merely 
called  to  the  excess  of  trespassers  killed  over 
those  injured.  Obviously  the  majority  were 
unable  to  make  any  report  on  their  own  account. 

Accidents  from   being  struck  by  locomotives  and 
cars  at  places  other  than  highway  crossings 

Now,  here  is  a  record  which  does  us  credit, 
if  we  are,  as  a  nation,  putting  up  the  railway  as 
a  death  dealing  agency.  5563  deaths  and  5304 
injuries  is  the  record  for  this  cause  in  1906! 
"Surely,"  you  say,  "these  must  have  been  the 
trespassers."  No,  3656,  mostly  trainmen  and 
trackmen,  and  612  passengers  and  others,  law- 


Attempts  to  Correct  Wrongs      191 

fully  on  railroad  property,  laid  down  their  lives 
or  were  mangled.  A  goodly  number  of  them 
were  injured  at  stations.  And  the  unpoetic 
subject,  "railway  stations"  is  now  my  theme. 

If  you  will  go  to  a  certain  place,  not  more  than 
a  dozen  miles  from  the  City  of  Newark,  N.  J., 
you  will  find  a  railway  station  that  comes  near 
being  a  model.  There  are  three  parallel  tracks, 
the  inner  one  being  for  "express  trains,"  which 
do  not  stop  at  this  station,  and  the  outer  two 
for  "local  trains,"  which  do  stop.  The  express 
track  is  fenced  off  from  the  local  tracks  by  neat 
but  substantial  iron  fences,  in  which  there  are 
gates  for  the  use  of  employees.  On  either  side 
of  the  local  tracks  there  are  comfortable  but  not 
obtrusive  station  houses.  If  you  want  to  go 
from  one  of  these  stations  to  the  other,  you  do  so 
by  passing  through  a  tunnel  under  the  tracks. 
I  do  not  know  certainly,  but  I  dare  say,  this 
station  has  not  the  record  of  a  single  death  or 
injury  to  passengers  or  employees — at  least  none 
from  being  struck  by  a  train.  The  secret  of  it 
all  is  that  no  one  is  permitted,  nor  will  it  be 
found  necessary,  to  cross  a  railway  track.  It 
almost  seems  that  to  be  killed  at  that  station 
one  would  have  to  commit  suicide — almost,  but 
not  quite,  because  the  station  is  defective  in  just 
one  particular;  people  may  go  upon  the  platform 
while  waiting  for  their  train. 

Stations  ought  to  be  so  arranged  and  fenced 


192  An  American  Transportation  System 

and  guarded,  that  no  person  could  cross  a  railroad 
track,  or  come  within  the  station  grounds  or  go 
upon  a  platform  to  take  a  train,  until  it  has  arrived 
and  come  to  a  full  stop. 

Now,  I  am  well  aware  that  this  is  interfering 
with  one  of  the  many  rights  of  my  fellow  citizen. 
For  is  it  not  his  right  to  take  care  of  himself 
under  any  and  all  circumstances?  Shall  he  not 
be  allowed  to  cross  railway  tracks  if  he  wants  to? 
Shall  he  not  retain  the  right  to  go  upon  and 
promenade  the  station  platform  while  waiting 
for  his  train?  And  has  not  he  done  these  things 
since  he  was  a  boy  without  being  killed  or  injured  ? 
Yes,  certainly,  but  it  is  just  such  acts  as  these 
which  swell  the  American  record  of  killed  and 
injured  in  railway  accidents.  It  is  not  the  thou- 
sandth time,  but  the  thousand  and  first  time 
which  catches  you.  And  it  is  exactly  this  princi- 
ple upon  which  our  railways  must  be  operated, 
if  we  are  to  have  freedom  from  accidents.  To 
avoid  the  thousand  and  first  time  which  kills, 
we  must  avoid  the  thousand  times  which  do  not 
kill.     There  is  absolutely  no  other  way  out  of  it. 

To  be  sure,  railway  tracks  must  be  crossed,  but 
they  must  be  crossed  by  bridges  over  them  or 
by  tunnels  under  them.  To  reduce  the  number 
of  railway  accidents — this  disgrace  to  the  railway 
profession  in  America — we  must  reduce  them  all 
along  the  line  and  everywhere.  To  put  railway 
stations  in  this  condition  throughout  the  country 


Attempts  to  Correct  Wrongs      193 

"costs."  It  should  be  the  law  that  railways 
should  provide  the  means  whereby  people  may 
cross  their  tracks  in  safety,  and  then  it  should  be 
made  the  law  that  any  one  found  upon  a  railway 
track  should  be  sent  to  jail. 

Nobody  was  ever  struck  by  a  railway  engine 
except  upon  a  railway  track,  or,  at  any  rate,  so 
near  to  it  that  he  was  poaching  on  its  preserve. 
Between  the  rails  of  a  railroad  there  are,  ordi- 
narily, just  four  feet  eight  inches  and  a  half,  and 
the  balance  of  the  unsafe  space  does  not  exceed 
three  feet;  yet  with  all  the  rest  of  the  world  to 
stand  and  walk  on,  some  eleven  thousand  people 
every  year  find  it  necessary  to  their  enjoyment 
to  end  their  days,  or  their  health,  on  this  narrow 
strip  of  land.  It  is  not,  as  I  before  intimated, 
that  I  am  so  much  worried  about  these  curious 
people,  as  I  am  annoyed  that  they  should  be  the 
means  of  giving  my  friend  such  a  bad  reputation. 
It  is  rather  to  protect  his  reputation  against  their 
assaults  that  I  would  make  it,  as  near  as  possible, 
impossible  for  them  to  get  within  a  destructive 
distance  of  him. 

But  there  is  another  class  of  people  who  stand 
upon  an  entirely  different  footing.  They  are  the 
attendants  of  my  friend.  Of  necessity  they  must 
go  upon  his  tracks  and  in  his  yards.  It  is  there- 
fore of  the  utmost  importance,  that  stations  and 
yards  be  kept  clear  of  everything  which  may  make 
more  dangerous  the  inherently  dangerous  work 


194  An  American  Transportation  System 

of  the  railway's  servants.  As  far  as  possible,  these 
places  should  be  kept  free  of  obstructions  of  all 
kinds  over  which  employees  may  trip  or  fall. 
They  have  about  all  they  can  do  to  attend  to  their 
legitimate  duties  and  escape  injury,  without  the 
added  burden  of  looking  out  for  pitfalls  broken 
drawbars  and  couplers,  exposed  ends  of  ties, 
switches,  pieces  of  coal  and  the  other  things  which 
frequently  make  our  yards  and  station  grounds 
look  like  junk  shops.  All  these  claim  their 
victims  every  year,  and  help  to  swell  the  already 
bloated  record  of  railway  accidents. 

Accidents  caused  by  collisions 

It  is  ever  the  unusual,  the  catastrophic,  the 
cataclysmic,  which  causes  sleepy  human  nature 
to  take  notice.  The  ceaseless  grind  of  death 
does  not  take  hold  upon  the  imagination.  When 
a  score  of  lives  are  blotted  out  ere  one  can  say  it 
lightens,  the  world  is  horrified  and,  momentarily, 
remedies  are  called  for.  But  who  is  there  who 
thinks  that  before  the  sun  shall  have  reached 
this  same  meridian  to-morrow,  and  as  surely  as 
it  will  do  so,  the  railways  of  the  United  States 
will  have  demanded  the  sacrifice  of  three  hundred 
and  sixty  victims;  that  thirty — not  one  less — 
who  were  happy  the  moment  before,  will  be 
corpses,  and  three  hundred  and  thirty  will  be 
writhing  upon  beds  of  torture? 


Attempts  to  Correct  Wrongs     195 

You  hear  only  of  the  ten  or  a  dozen  collisions 
each  year  in  which  there  is  great  loss  of  life,  not 
of  the  6000  which  annually  occur,  with  more  or 
less  disastrous  results,  but  always  with  potential 
destructiveness.  Nor  do  you  hear  of  the  thou- 
sands more  which  were  rust  barely  prevented  by 
good  luck.  And  all  this  horrible  record  could  be 
blotted  out  and  the  sheet  made  clean,  if  only  we 
would.  It  is  simply  a  question  0}  cost.  In  1906 
there  were  9041  injuries  from  collisions  in  the 
, United  States.  I  have  not  the  record  of  Great 
Britain  for  that  year,  but  there 'have  been  years 
in  which  not  a  single  passenger  was  killed  or 
seriously  injured  by  collisions  in  all  Great  Britain.  \ 

I  do  not  need  any  broader  fact  than  this  differ- 
ence between  English  and  American  railways,  to 
teach  me  at  once  that  collisions  are  unnecessary, 
and  that  to  allow  the  continuance  of  the  conditions 
which  in  this  country  make  collisions  possible, 
should  cause  us  to  muffle  our  heads  in  shame  and 
never  again  to  say  anything  of  the  greatness  of 
America  until  this  cloak  can  be  removed. 

The  causes  of  collisions 

Need  I  tell  you  of  the  causes  of  collisions? 
For  very  shame  let  me  be  done  with  the  matter 
quickly.  Butting  collisions — that  is,  clashes  be- 
tween trains  running  in  opposite  directions — 
can  never  occur  on  double-tracked  roads.     An- 


196  An  American  Transportation  System 

gular  collisions — that  is,  collisions  between  trains 
whose  tracks  cross  each  other — can  never  occur 
except  the  tracks  cross  on  the  same  level.  Rear- 
end  collisions — that  is,  where  one  train  runs  into 
the  rear  of  another  train — can  rarely  happen,  if 
well-known  appliances  are  used  to  keep  the  trains 
a  fixed  distance  apart.  >  Now,  if  you  want  to 
know  why  England  has  its  immunity  from  colli- 
sions, and  why  they  are  epidemic  in  America, 
you  will  find  the  reasons  to  be  exactly  as  follows : 
In  the  United  States  we  depend  for  the  avoidance 
of  collisions  upon  the  carefulness  of  employees. 
In  Great  Britain  they  depend  for  the  avoidance 
of  collisions  upon  conditions  which  render  them 
impossible  irrespective  of  the  carefulness  of  em- 
ployees. 

In  Great  Britain,  all  roads  are  double-tracked. 
In  the  United  States  in  1907,  of  the  224,382  miles 
of  main  track,  there  were  less  than  20,000  miles 
of  double  track. 

In  Great  Britain,  no  two  roads  cross  each  other 
on  the  same  grade,  In  the  United  States,  prac- 
tically all  roads  cross  each  other  on  the  same 
grade. 

In  Great  Britain,  the  block  system  is  employed 
on  every  mile  of  road.  In  the  United  States,  it 
is  employed  in  but  a  haphazard  way,  and  its 
compulsory  introduction  is  resisted  by  most 
railway  managers  and,  therefore,  congress  is 
silent. 


Attempts  to  Correct  Wrongs      197 

In  short,  the  American  system  of  depending 
upon  the  care  of  employees  to  avert  collisions 
is  a  failure.  The  British  system  of  rendering 
collisions  impossible  is  a  success.  In  theory 
the  American  system  is  perfect;  in  practice  it 
fails.  In  one  thousand  cases  it  works;  in  the 
thousand  and  first  case  it  kills.  The  prevention 
of  all  railway  accidents  is  the  elimination  of  the 
thousand  and  first  case. 

It  is  not  for  me,  at  this  late  day,  to  argue  about 
the  merit  of  the  block  system — automatic  or 
manual.  There  are  three  facts  which  are  sufficient 
for  me.  (1)  Over  half  the  railway  world,  the 
block  system  is  the  device  which  has  been  found 
best  calculated  to  prevent  rear-end  collisions. 
(2)  It  is  used  by  the  most  progressive  roads  in 
this  country.  (3)  It  is  used  by  all  railways  on 
specially  dangerous  parts  of  their  roads.  And 
finally  the  chief  objection  which  is  raised  to  its 
universal  use,  is  one  of  "cost." 

Not  that  I  am  unaware  that  horrible  rear-end 
collisions  have  occurred,  in  this  country  at  least, 
where  the  block  system  is  in  use.  For  neither 
the  block  system  nor  any  other  system,  short  of 
one  which  ditches  his  train,  can  ever  prevent  an 
engineer  running  past  a  signal,  unless  by  some 
means  that  signal  is  impressed  upon  his  senses. 
It  must  reach  him  else  it  might  as  well  not  be 
there.  So  in  the  end,  the  efficiency  of  the  block 
system  must  depend  upon  human  care.     "Then, " 


198  An  American  Transportation  System 

you  say,  "that  begs  the  whole  question."  And, 
in  truth,  I  admit  that  it  begs  a  large  part  of  the 
question,  but  not  the  whole  question.  It  is 
true — literally  true — that  rold,  tried  engineers 
run  past  signals.  The  reason  why  the  block 
system  is  not  a  perfect  preventer  of  collision 
accidents,  is  exactly  the  same  as  the  reason  why 
the  time-interval  system  is  not  perfect.  It  is 
a  question  of  degree,  not  of  kind.  The  block 
system  reduces  the  number  of  error  possibilities 
close  to  the  minimum ;  it  does  not  entirely  elim- 
inate the  possibility  of  error.  But  every  time 
you  cut  off  one  possibility  of  error  you  increase, 
by  a  perceptible  percentage,  the  safety  of  railway 
operations. 

I  have  said  that  enginemen  run  past  danger 
signals.  But  not  only  do  engineers  make  mistakes. 
Train  dispatchers,  station  agents,  switchmen, 
and  all  other  human  agencies  upon  whom  the 
safe  operations  of  trains  depend,  make  mistakes. 
I  have  tried  to  deduce  some  universal  principle 
governing  these  mistakes.  The  task  is  hopeless. 
Sometimes  errors  may  be  due  to  the  fact  that 
men  have  been  on  duty  so  many  hours  that  their 
senses  are  no  longer  active.  But  errors  are  just 
about  as  likely  to  be  found  where  men  have 
just  gone  on  duty  fresh  from  rest.  3  Nor  is  it 
often  a  question  of  physical  disability — of  ill- 
health  or  failure  of  vision.  Men  with  first -class 
sight — perfect  color  sight — and  in  robust  condi- 


Attempts  to  Correct  Wrongs     199 

tion,  make  mistakes.  Nor  is  it  by  any  means 
a  question  of  experience.  The  worst  train  wreck 
I  ever  knew  of,  was  caused  by  an  engineer  of 
twenty-five  years'  experience  and  an  almost 
perfect  record,  running  past  a  stop  signal.  Nor 
is  it  a  question  of  the  use  of  alcohol.  The  soberest 
class  of  men  on  the  face  of  this  earth  are  American 
engineers  and  trainmen.  Not  only  do  they  expel 
a  man  from  their  orders  who  ever  shows  the 
slightest  evidence  of  intoxication  when  on  duty, 
but  they  are  rapidly  becoming  total  abstainers 
even  when  off  duty.  They  are  the  most  sensible 
prohibitionists  in  the  world.  Why  is  it  then,  that 
these  men,  who  ordinarily  are  in  perfectly  fit 
condition,  make  such  terrible  mistakes?  There 
is  but  one  answer :  ^They  err  for  the  same  reason 
that  all  men  err — because  to  err  is  human.  The 
human  machine  is  not  perfect. 

But  while  I  find  it  impossible  to  deduce  any 
principle  controlling  the  errors  of  railway  em- 
ployees, much  less  to  assign  any  common  cause 
for  their  blunders,  yet  I  think  I  can  see  with  com- 
parative clearness  one  considerable  reason  for  the 
occurrence  of  that  most  fatal  of  all  mistakes — 
failure  to  observe  a  block,  danger,  or  caution 
signal. 

I  advance  this  suggestion  with  the  utmost 
diffidence,  because  I  am  not  a  practical  railway 
man  and  must  depend  most  largely  for  my  con- 
clusions upon  recorded  facts.     It  is  this:    The 


200  An  American  Transportation  System 

multiplicity  of  duties  which  devolve  upon  each 
employee;  the  consequence  of  which  is  that  at 
a  most  critical  moment  the  observation  of  the 
employee  is  distracted. 

Certainly  it  is  the  duty  of  the  engineer  to  keep 
his  eyes  open  for  signals,  but  it  is  also,  and  pri- 
marily, his  duty  to  work  his  engine.  If  something 
goes  wrong  with  it,  his  attention  is  riveted  upon 
his  engine  and  an  unnoticed  signal  flies  by. 
Certainly  it  is  the  business  of  the  fireman  to  look 
out  for  signals,  but  it  is  also  his  business  to  keep 
the  machine  fed.  Likewise  it  is  the  duty  of  the 
conductor  to  look  out  for  signals,  but  it  is  also 
his  duty  to  take  up  tickets  and  answer  all  the 
fool  questions  that  curious  passengers  may  ask. 
And  so  it  goes,  with  the  result  that  not  infrequently 
the  whole  train  crew  will  solemnly  swear  that  no 
stop  or  danger  signal  was  showing,  whereas  in 
fact  it  was  in  plain  sight.  Under  such  circum- 
stances, most  men  say  the  train  crew  were  simply 
lying.  But  that  is  a  mistake.  No  sane  engineer 
ever  yet  deliberately  ran  past  a  stop  signal. 
Nor  would  the  crew  permit  him  to  do  so.  The 
simple  fact  is,  that  by  a  concatenation  of  circum- 
stances, not  one  of  the  train  force  saw  the  signal. 
Yet  this  is  one  of  the  most  common  causes  of  the 
six  thousand  collisions  which  occur  every  year  on 
our  roads..  And  they  will  continue,  only  in  a  les- 
sened number,  even  when  the  block  system  is  in- 
stalled on  every  mile  of  railway ;  for,  after  all,  the 


Attempts  to  Correct  Wrongs     201 

block  system  "blocks,"  only  when  its  signals  are 
observed. 

'  Now  what  is  the  trouble?  Obviously,  failure 
to  observe  signals.  What  is  the  remedy?  Ob- 
viously, to  observe  signals.  But  by  whom  ?  By 
the  crew  of  the  train,  of  course.  But,  you  see, 
notwithstanding  the  crew  should  observe  the 
signals,  they  sometimes  fail  to  do  so.  You  make 
no  advance  by  this  method  of  reasoning.  If  this 
were  my  own  business,  it  would  not  take  me  very 
long  to  try  a  remedy.  I  would  simply  say: 
11  Boys,  it  appears  that  you  can't  or  don't  always 
observe  the  signals,  and  it  appears  that  most 
commonly  this  is  because  you  are  doing  some- 
thing else.  Well,  if  that  is  the  trouble,  we  will 
put  one  more  man  on  the  train  whose  special 
business  it  is  to  observe  signals  and  do  nothing 
else.  1  If  he  can  save  me  some  of  these  ten  millions 
that  were  lost  last  year  in  smashed  up  engines 
and  cars,  and  some  of  the  millions  I  paid  for 
destroyed  freight  and  damaged  passengers,  and 
if  he  can  save  some  of  these  nine  thousand  people 
whom  we  killed  and  injured  last  year,  I  reckon 
he  will  earn  his  wages." 

As  for  the  station  of  this  man  on  the  train,  I 
can  only  say  that  it  ought  to  have  three  essen- 
tials: (1)  where  he  could  see;  (2)  in  instant 
touch  with  the  train  control;  and  (3)  where  he 
would  certainly  be  killed  if  he  failed  to  keep  his 
eyes  open. . 


202  An  American  Transportation  System 

Of  course  all  engineers  would  vote  such  a  man 
a  nuisance.  And  so  will  I,  when  engineers  can 
guarantee  me  that  they  will  at  all  times  stop  their 
trains  before  a  red  signal.  But  so  long  as  such 
catastrophies  occur  as  that  near  Washington, 
December  30,  1906,  wherein  forty-three  persons 
were  killed  and  sixty-three  injured,  because  the 
whole  train  crew  failed  to  see  a  red  signal  in  plain 
sight  on  a  road  block-signalled  throughout,  I 
shall  be  inclined  to  think  that  there  should  be 
some  one  on  a  train  whose  special  business  it  is 
to  look  out  for  signals. 

While  I  am  making  foolish  suggestions,  I  may 
as  well  make  another  one.  There  are  three  kinds 
of  blunders  resulting  in  collisions,  which  blunders 
are  of  a  most  horrifying  character.  They  are 
such  as  are  discovered  just  too  late,  after  they  are 
made,  to  be  corrected,  yet  which  could  be  corrected 
if  only  some  means  were  provided  by  which  a 
moving  train  could  be  communicated  with.  The 
first  of  these  is  where  a  train  dispatcher,  forgetting 
the  fact  that  he  had  sent  a  train  from  one  station, 
sends  out  another  from  the  next  station,  the  two 
trains  moving  in  opposite  directions  on  a  single- 
track  road.  There  is  nothing  for  him  to  do  but 
go  insane,  knowing  that  his  blunder  will  cause 
these  two  trains  to  crash  into  each  other.  The 
second  is  the  case  of  an  engineer  running  past  a 
stop  signal,  when  the  signal  man,  or  some  member 
of  the  station  force,  knows  the  fact  yet  is  unable 


Attempts  to  Correct  Wrongs      203 

to  communicate  with  the  train.  The  third  is 
the  case  of  the  agent  or  operator  who  discovers, 
just  after  the  train  has  started,  that  he  has  de- 
livered the  wrong  order  to  the  conductor,  or 
made  some  mistake  in  the  order. 

Now  it  seems  to  me  that  a  very  simple  and 
inexpensive  device  would  be  sufficient  to  correct 
all  such  known  blunders,  thus  saving  many  lives 
and  much  property.  Suppose  that  an  electric- 
light  wire  was  strung  along  the  telegraph  poles 
always  found  close  to  the  railways.  At  each  pole 
a  red-light  bulb  is  attached.  These  are  connected 
with  storage  batteries  in  each  station  By  simply 
turning  a  switch  these  red  lights  could  be  flashed 
on  between  the  two  stations,  and  the  trains  brought 
to  a  standstill.  The  device  would  cost  little 
more  than  the  wire  of  a  telegraph  line,  and  the 
electricity  being  required  only  for  emergency 
would  amount  to  but  little,  provided  a  storage 
battery  could  be  used. 

Such  an  appliance  would  have  saved  the  lives 
lost  in  the  Washington  disaster  above  referred 
to.  Just  as  the  train  ran  past  his  red  signal,  the 
signal  man  wired  that  fact  to  Washington.  If 
instead,  he  had  switched  on  the  red  lights,  the 
engineer  could  have  not  failed  to  see  them  and 
the  accident  been  avoided.  Moreover,  I  should 
imagine  there  could  be  some  means  devised,  by 
which  an  engine  running  on  a  block  track  would 
automatically  make  the  connection  necessary  to 


204  An  American  Transportation  System 

light  these  lights.  But  about  that  I  am  not 
electrician  enough  to  know.  Of  course,  the  whole 
device  is  so  simple  and  inexpensive,  that  there 
must  be  some  insuperable  objection  to  it  or  it 
would  have  been  in  general  use  long  ago.  For  in 
this  case,  at  any  rate,  it  is  not  a  question  of 
"cost." 

Accidents  caused  by  derailments 

One-third  of  all  accidents  legitimately  chargeable 
to  railway  operation,  come  from  collisions  and 
derailments,  of  which  the  latter  furnish  about 
twelve  per  cent.  ,  There  is  no  cause  of  railway 
accidents  about  which  one  may  learn  so  little 
from  the  reports,  as  derailments.  Yet  we  know 
perfectly  well  the  main  causes  which  give  rise 
to  trouble  of  this  kind. 

As  in  the  case  of  collisions,  so  with  derailments, 
you  only  hear  of  those  resulting  in  considerable 
loss  of  life.  Probably  not  one  person  in  a  thou- 
sand knows  that  there  are  from  4000  to  6000 
derailments  every  year  in  this  country,  or  that 
in  1906,  5218  people  were  killed  or  injured,  or 
that  ^accidents  of  this  kind  were  more  than  three 
times  more  numerous  in  igo6  than  they  were  in 
igoo.ji 

It  would  seem  that  accidents  from  this  cause 
do  not  follow  the  "law  of  railway  accidents," 
for  they  have  increased  out  of  all  proportion  to 


Attempts  to  Correct  Wrongs      205 

the  volume  of  traffic.  But  this  fact,  so  far  from 
disproving  the  law,  is  strongly  confirmatory  of 
it.  For  the  conditions  which  prevailed  in  1906, 
were  not  the  conditions  which  prevailed  in  1900. 
On  the  contrary,  during  that  period  (and  since) 
the  weight  of  rolling  stock  and  its  carrying  capa- 
city have  enormously  increased,  without  a  corres- 
ponding increase  in  the  strength  of  roadbed,  rails 
and  structures.  ^  And  this  is  exactly  the  change 
of  condition  which  would  be  expected  to  result 
in  this  particular  class  of  accidents. 

As  I  remember  the  law  of  the  destructive 
effect  of  equipment  and  rate  of  speed  upon  road- 
bed, rails  and  structures,  it  is  this:  Destructive 
action  is  in  proportion  to  the  weight  of  equip- 
ment multiplied  by  its  velocity.  That  is,  a  car 
having  a  capacity  of  thirty  tons  moving  at  a 
speed  of  twenty  miles,  would  have  just  one-half 
the  destructive  effect  of  a  car  having  a  capacity 
of  sixty  tons  moving  at  the  same  speed.  The 
constant  tendency  is  to  the  use  of  rolling  stock 
of  greater  weight  and  capacity.  The  figures 
showing  this  are  available  for  the  years  1902-6 
only.  The  number  of  cars  of  thirty  tons  capacity 
increased  during  that  period  but  19%,  while 
those  of  forty  tons  capacity  increased  66%, 
and  those  of  fifty  tons  over  300% ;  while  we  have 
cars  of  100  tons  capacity.  Now,  unless  the 
strength  of  the  bed  over  which  these  tremendously 
heavy  trains  are  rolled,  is  increased  in  proportion 


206  An  American  Transportation  System 

to  the  increase  of  weight  (the  speed  remaining 
constant)  of  trains;  nothing  less  can  be  expected 
than  that  frequently  some  part  of  the  bed  will 
give  way  and  derailments  follow.  For  everybody 
knows  how  the  crust  of  a  highway,  or  of  ice,  will 
be  broken  through  by  a  heavily  loaded  wagon, 
while  a  light  one  will  pass  over  it  with  impunity. 
This  failure  of  our  railways  to  increase  the  carrying 
capacity  of  rails,  roadbed  and  structures  in  corres- 
pondence with  the  ever  increasing  weight  of 
equipment,  has  doubtless  been  the  main  reason 
why  accidents  from  derailments  have  increased 
from  1693  in  1900  to  5218  in  1906. 

I  mention  these  facts  now,  because  of  their 
extensive  implications.    In  the  first  place  there  has 

^never  been  any  thought  on  the  part  of  congress, 
or  of  any  state  legislature,  that  railways  should 
have  any  standards  of  construction,  i  Any  old 
thing  which  consisted  of  rails  laid  on  the  dirt, 
has   been  called  a  railroad  and   used   as  such. 

\  Always  we  have  depended  on  railway  corpora- 
tions to  do  the  necessary  and  proper  thing,  and 
in  ninety  per  cent,  of  the  cases  what  they  did 
was  to  make  the  very  flimsiest  thing  which  could 
pass  under  the  name  of  a  railroad.^  No  wonder 
that  we  hold  the  world's  record  as  railway  ac- 
cident producers!  In  the  next  place  it  is  obvious, 
that,  with  the  exception  of  a  few  roads,  which 
have  constantly  kept  a  standard  of  construction 
and  maintenance  equal  to  all  requirements,  our 


Attempts  to  Correct  Wrongs      207 

^entire  railway  system  must  sooner  or  later  be 
overhauled,  if  we  are  ever  to  have  safety  and 
adequacy.^  It  is  equally  obvious  that  the  enor- 
mousTexpense  involved  in  this  overhauling,  cannot 
be  met  out  of  income.  And  there  I  leave  this 
subject  for  the  present,  merely  remarking  that 
the  proper  name  for  derailments  is,  in  the  over- 
whelming majority  of  cases,  simply  bad  construc- 
tion or  bad  material.  All  this  talk  about  the 
"breaking  of  rails,"  the  "spreading  of  rails"  and 
the  "unknown  cause"  and  the  "unexplained 
cause,"  may  be  translated  into  poor  material 
or  poor  construction.  First  class  roads  that  are 
built  and  maintained  to  do  the  work  that  is  placed 
upon  them,  do  not  have  derailments  from  these 
causes.  Of  course,  I  am  well  aware  that  there 
are  derailments  from  many  other  causes,  among 
them  the  most  potent  being  the  carelessness  of 
switchmen.  Later  we  will  try  to  see  if  there  is 
any  way  of  "legislating"  care  into  a  man's  head. 

Other  causes  of  railway  accidents 

There  are  two  minor  classes  of  accidents  called 
respectively,  "the  parting  of  trains"  and  "the 
breaking  down  of  equipment."  The  causes  of 
these  accidents  are  so  obvious  that  no  time  need 
be  devoted  to  them.  Most  cases  of  the  former 
kind  are  directly  due  to  the  continuance  in  use  of 
worn  out  couplers;  most  of  the  latter  kind  to  the 


208  An  American  Transportation  System 

fact  that\some  one  or  more  of  the  links  which 
make  up  the  chain  called  a  train  is  weak;. as, 
for  example,  where  old,  worn  out  cars  are  placed 
between  new,  heavy,  cars,  when  the  former  suffer 
from  the  same  trouble  that  happens  to  an  egg 
when  it  is  crushed  between  the  two  hands.  The 
remedies  for  these  accidents  are  obvious,  and 
they  involve  an  incident  of  railroading  which  will 
hereafter  receive  some  consideration — the  stand- 
ardization of  equipment. ''  It  is  easy  to  overlook 
the  fact — of  prime  importance — that  from  one 
standpoint,  all  the  railways  of  this  country  are 
but  one.  For,  sooner  or  later,  a  freight  car  may 
travel  over  every  road ;  its  home  is  on  the  track, 
its  destination  wherever  its  freight  is  to  be  deliv- 
ered. Obviously,  then,  ^every  car  should  be  so 
standardized  as  to  mate  with  every  other  car, 
and  all  roadbeds  and  structures  should  be  capable 
of  carrying  any  and  every  car.  While  this  sort 
of  transportation  is  now  being  carried  on  in  a 
makeshift  and  haphazard  sort  of  way,  with  the  in- 
cident of  many  accidents,  a  thousand  inconven- 
iences and  millions  of  waste;  it  can  never  reach 
perfection  until  we  have  a  uniform  transportation 
system. 


Accidents  caused  by  overhead  obstructions 

It  is  a  curious  thing  that  the  builders  of  railways, 
knowing  that  men  would  be  compelled  to  work 


Attempts  to  Correct  Wrongs     209 

on  top  of  cars,  should  deliberately  have  so  planned 
their  overhead  structures,  that  they  would  of 
necessity  knock  men  off  the  cars  as  the  train 
passed  under  the  structures.  ,  Of  course  it  is  too 
late  now  to  remedy  the  mode  of  construction, 
but  the  railways  may  at  least  put  up,  at  a  reason- 
able distance  from  every  such  overhead  obstruc- 
tion, something  which  will  indubitably  call  the 
trainman's  attention  to  the  approach  of  the 
obstruction. 

Accidents   caused   by   jumping   on   or   off   trains, 
locomotives  or  cars  in  motion 

Setting  aside  the  2126  ride-stealers,  tramps, 
hoboSj  and  the  like  who  were  killed  or  injured  in 
1906  by  jumping  on  or  off  cars  in  motion,  we 
still  have  to  charge  my  friend  with  7556  casual- 
ties from  this  cause  in  that  year.  Of  these  161 8 
were  passengers  and  5826  were  trainmen  and 
other  employees. 

It  does  seem  a  remarkable  thing  that  in  this 
twentieth  century,  passengers  should  still  be 
jumping  on  and  off  moving  trains.  Yet  it  is  a 
rare  event  to  see  a  train  leave  a  station,  when 
some  belated  good-bye-sayer  does  not  make  a 
flying  leap  to  the  platform,  or  when  some  lazy 
passenger  does  not  swing  himself  onto  the  car 
after  it  is  in  motion.  Nor  is  it  unusual  to  see 
passengers  in  such  a  hurry  to  get  killed  that  they 


210  An  American  Transportation  System 

jump  off  the  car  before  it  has  come  to  a  full  stop. 
Foolhardy  as  these  people  are,  the  railway  could 
very  easily  protect  itself  against  them  by  the  plat- 
form scheme  heretofore  mentioned,  or  by  a  rigid 
rule  closing  its  doors  a  minute  before  the  train 
starts  and  not  opening  them  until  the  train  has 
come  to  a  full  stop.  If  the  aforesaid  farewell- 
taker  were  compelled  to  ride  a  few  times  to  the 
next  station  and  pay  his  fare  back,  it  might  have 
a  tendency  to  break  him  of  his  fond  habit.  And 
if  the  habitually  lazy  traveler  and  the  man  who 
wants  to  get  off  at  each  station  and  survey  the 
country,  were  compelled  to  wait  for  the  next 
train  it  might  teach  some  of  them  that  the  best 
way  to  save  their  legs  is  not  to  try  to  jump  on  a 
moving  train. 

These  cases  aside,  we  have  left  the  thousands 
of  employees — mostly  trainmen  and  switchmen — 
who  are  annually  killed  or  injured  in  this  way. 
^First  we  have  a  considerable  number  who  are 
hurt  by  jumping  from  trains  in  the  hope  of  avoid- 
ing a  more  certain  injury — generally  from  an 
approaching  collision.  For  the  most  part  the 
remainder  are  injured  while  performing  what  is 
recognized  as  legitimate  train  service.  Right 
here  is  where  you  will  find  the  railways'  defense. 
There  is  no  rule  requiring  a  trainman  in  the  per- 
formance of  any  of  his  duties,  to  jump  on  or  off 
a  moving  car,  while  it  is  forbidden  by  the  rules 
of  many  roads.     Yet  it  would  not  be  far  from  the 


Attempts  to  Correct  Wrongs      211 

truth  to  say  that  the  trainman  or  switchman 
who  obeyed  this  rule  could  not  hold  his  job.  The 
amount  of  work  which  the  railroad  expects  to 
get  out  of  its  employees  and  out  of  the  road, 
could  not  be  gotten  if  this  rule  were  lived  up  to. 
It  is  but  one  of  many  illustrations  which  might 
be  given  of  rules  which  are  made  to  be  violated. 
The  blame  falls  on  the  employee  if  the  rule  is 
violated,  and  he  is  blamed  still  more  if  it  is  not 
violated.^ 

Railway  employees  do  not  jump  on  and  off 
moving  trains  for  the  mere  fun  of  it,  nor  because 
they  want  to  do  so,  but  because  they  know  they 
cannot  perform  their  duties  in  the  time  required 
unless  they  jump.  Find  me  a  railway  that  ever 
discharged  or  laid  off  an  employee  for  violating 
this  rule,  and  I  will  withdraw  my  remarks.  It 
is  certainly  a  good  rule  which  prohibits  employees 
from  riding  on  the  pilot  of  road  engines,  yet  the 
roads  know  that  it  is  violated  every  hour  of  the 
day.  Why,  then,  are  not  men  disciplined  for 
violating  this  rule?  Simply  because  the  roads 
expect  the  rule  to  be  violated.  Accidents  of  this 
class  can  never  be  done  away  with,  until  the  roads 
are  made  to  enforce  their  farcical  rules.  I  And  this 
brings  me  to  the  final  subject  of  this  section. 

Accidents  caused  by  the  negligence  of  employees 
or  their  disobedience  of  rules 

I   began   my  investigation   of   the   subject   of 


212  An  American  Transportation  System 

railway  accidents  with  the  positive  conviction 
that  they  were  primarily  and  principally  due  to 
the  negligence  of  railway  employees,  and  to  their 
failure  to  live  up  to  the  rules  made  for  their 
guidance  in  the  prevention  of  accidents.  After 
the  examination  of  practically  all  the  evidence 
I  could  find  on  the  subject,  I  have  been  forced 
not  only  to  modify  my  former  conviction  but  to 
the  deliberate  opinion,  that  the  ^overwhelming 
majority  of  accidents  are  due  to  the  failure  and 
refusal  of  the  railway  corporations  to  provide 
the  best  available  means  of  preventing  accidents, 
and  to  their  failure  and  refusal  to  provide  their 
employees  with  the  safest  available  appliances 
with  which  to  work.  I  believe  that  this  statement 
is  justified  by  past  history,  and  by  present  condi- 
tions and  that  these  conditions  will  project 
themselves  into  the  future  and  that  the  aggregate 
of  railway  accidents  will  become  greater  and 
greater  every  year,  subject  only  to  variations 
caused  by  varying  volumes  of  traffic. 

Railway  accidents  will  recur  each  year  with  a 
precision  comparable  only  to  the  revolution  of 
our  planet,  unless  and  until  the  conditions  which 
make  them  possible  be  changed.  These  condi- 
tions are  not  primarily  dependent  upon  the  care 
and  negligence  of  employees,  which  will  continue 
forever  as  they  have  been  in  the  past.  The  condi- 
tions are  not  human.  They  are  mechanical. 
They  are  roadbeds,  rails,  structures,  equipments 


Attempts  to  Correct  Wrongs     213 

and  appliances.  I  might  almost  say,  greater 
safety  lies  in  the  direction  of  automatic  safety — 
in  the  lessening  of  the  quantity  of  human  care 
required^  If  it  were  not  that  it  would  weaken 
the  argument  I  would  like  to  add,  that  there  are 
those  living  who  will  see  trains  nm  across  this 
continent  with  trainmen  largely  as  perfunctory 
accompaniments.  Meantime,  keeping  ourselves 
down  to  earth,  it  is  obvious  that  we  can  never 
have  immunity  from  head-on  collisions,  until  our 
railways  are  double  tracked;  nor  from  angular 
collisions  and  highway  crossing  accidents,  until 
no  road  crosses  another,  or  a  highway,  on  the 
same  grade;  nor  from  rear-end  collisions,  until 
appliances  are  used  to  keep  trains  a  fixed  distance 
apart,  with  as  little  intervention  of  the  human 
element  as  possible ;  nor  from  derailments,  until  the 
strength  of  roadbeds,  rails  and  structures  are 
proportional  to  the  weight  of  the  rolling  stock; 
nor  from  parting  of  trains,  until  worn  couplers 
are  discarded;  nor  from  the  breaking  down  of  cars, 
until  old  and  weak  cars  are  deliberately  discarded ; 
nor  from  overhead  obstructions,  until  they  are  re- 
moved or  appliances  be  employed  duly  impressing 
upon  workmen  the  approach  to  such  obstruction. 
Thus  you  may  begin  to  understand  what  is 
meant  by  saying  that  immunity  from  railway 
accidents  must  be  brought  about  by  the  use  of 
mechanical  means,  rather  than  by  human  means. 
You  cannot  expect  greatly  to  inculcate  care  or 


214  An  American  Transportation  System 

eradicate  negligence  by  legislation,  but  you' can 
largely  prevent  accidents  by  the  use  of  mechanical 
means  and  appliances  which  do  not  demand 
such  extraordinary  care  and  which  largely  render 
innocuous  the  negligence  and  forgetfulness  which 
always  have  characterized^  now  do,  and  always 
will  characterize  human  action. 

From  these  strong  statements  it  might  be 
inferred  that  I  would  not  hold  railway  employees 
up  to  the  highest  degree  of  excellence.  On  the 
contrary  I  would,  both  by  penalties  and  by  law, 
hold  railway  employees  to  the  fullest  measure  of 
responsibility,  to  the  strictest  obedience  to  rules 
which  are  not  made  to  be  violated,  and  to  the 
strictest  discipline.  To  begin  with,  however, 
the  reform  lies  in  the  hands  of  the  railway  com- 
panies. Not  only  does  the  everlasting  slaughter 
of  employees  call  for  continuous  renewals,  but 
the  complaint  is  universal,  that  in  times  when 
railway  business  is  excessive,  new  men  are  pressed 
into  positions  of  responsibility  for  which  they  are 
not  fitted  by  experience.  The  employment  of 
incompetent  or  inexperienced  men  is  alike  unjust 
to  the  public  and  to  other  employees.  Here  again 
the  fault  lies  with  the  railway  corporations. 
The  law  should  punish  with  severity,  the  respon- 
sible railway  official  who  places  in  a  position  of 
responsibility  a  man  not  known  to  be  competent  to 
fill  it.  It  is  neither  a  deterrent  nor  a  punishment 
simply  to  hold  the  corporations  liable  to  damages. 


Attempts  to  Correct  Wrongs      215 

In  the  next  place,  it  should  be  made  an  offense 
for  an  employee  to  violate  a  rule,  whether  or  not 
the  violation  results  in  an  accident.  And  if  employ- 
ees have  not  the  sense  to  protect  themselves  by 
reporting  delinquents  there  is  but  one  remedy — 
the  penalizing  of  the  entire  crew.  I  cannot  but 
feel  that  there  is  a  growing  disposition  on  the 
part  of  the  splendid  organizations  of  railway 
employees,  to  see  the  inherent  justice  of  this 
position.  For  the  protection  of  their  own  men, 
if  not  for  the  protection  of  the  public,  and  the 
railways,  they  can  neither  afford  to  shield  a  de- 
linquent, nor  to  allow  other  employees  to  do  so.  I 
hope  the  time  will  soon  come,  when  every  employee 
will  feel  it  to  be  his  honorable  duty  fearlessly  to 
report  an  infraction  of  a  railway  regulation,  if  not 
to  his  superior  at  least  to  his  organization. 

Finally,  it  would  be  the  most  remunerative 
investment  that  railways  could  make,  to  have 
an  organized  body  of  skilled  instructors.  Expe- 
rience is,  of  course,  the  best  instructor  but  some- 
times, if  not  ordinarily,  terribly  expensive.  This 
is  especially  so  when  new  appliances  are  being 
introduced.  It  is  more  dangerous  for  an  unin- 
structed  employee  to  use  a  new  and  safer  ap- 
pliance, than  an  old  unsafe  one. 

The  deep-down  cause  of  railway  accidents 

If  we  brush  aside  all  "immediate"  and  "proxi- 


216  An  American  Transportation  System 

mate"  causes  of  railway  accidents,  and  all  "con- 
ditions as  we  find  them"  and  the  like  surface 
indications,  and  get  down  to  the  very  ^bottom 
cause  of  railway  unsafety;  we  will  find  it  to  be 
about  as  follows:  We  have  been  trying  here  in 
the  United  States  to  do  railroading  in  a  cheap, 
rather  than  in  an  economical  way.  All  this  talk 
that  we  hear  about  "the  conditions  being  peculiar 
to  a  new  country, "  is  pure  unadulterated  rubbish. 
It  is  about  time  we  should  get  over  playing  the 
part  of  "the  infant  mewling  and  puking  in  the 
nurse's  arms,"  and  assume  the  responsibilities 
of  "a  people." 

Now,  there  are  two  main  reasons  why  we  have 
been  trying  to  do  railroading  in  a  cheap  rather 
than  in  an  economical  way.  The  first  is  a  railroad 
reason,  the  second  a  public  reason.  The 'railroad 
reason  is  this:  Our  railway  managers  have 
subordinated  the  railway  as  a  physical  means  of 
transportation  to  the  railway  as  a  financial  opera- 
tion— they  have  wanted  to  make  and  they  have 
made  their  money,  by  dealing,  speculating, 
gambling  in,  railway  securities,  rather  than  out 
of  the  legitimate  profits  which  would  arise  from 
an  investment  in  a  paying  enterprise.  The 
"^public  reason  is  this:  The  people,  utterly  dis- 
gusted with  the  financial  methods  of  railway 
managers,  have  thought  of  no  way  to  " get  even" 
with  them,  except  by  demanding  cheap  rates. 
Thus  making  the  railway  a  stock  gamble,  and 


Attempts  to  Correct  Wrongs      217 

cheap  rates  combined,  have  given  us  a  cheap  and 
murdering  railway  system.^  But  all  the  stock 
gambling  which  railway  managers  can  indulge 
in,  does  not  result  in  the  slightest  betterment 
of  their  roads.  They,  the  managers,  may  make 
millions  for  themselves,  but  that  does  not  add  a 
farthing  to  the  value  of  the  roads.  Nor  can  the 
conditions  necessary  for  safety  (and  adequacy) 
be  brought  about  by  the  average  rates  now  charged, 
simply  because,  all  questions  as  to  dividends 
aside,  the  rates  now  charged  are  not  sufficient 
to  raise  enough  revenue  to  pay  the  cost  of  operat- 
ing and  maintaining  the  roads  and  the  interest 
on  the  investment  necessary  to  make  the  changes. 
•The  simple  truth  is,  the  public  has  been  hitting  the 
railways  in  the  wrong  place.  The  blows  should 
have  been  landed  on  their  financial  methods.  (  Or 
to  put  it  otherwise  and  very  elegantly:  you  can- 
not cure  the  rotten  financial  disease  by  starving 
the  patient. 

As  I  write,  the  voice  of  suffering  touches  the 
sympathetic  heart  of  the  whole  world,  and  hands 
laden  with  help  reach  over  oceans  doing  what 
may  be  done  to  relieve  the  distress  of  the  thou- 
sands ruined  by  the  crumbled  cities  of  the  Straits 
of  Messina.  And  well  they  may;  for  the  telegraph 
says  there  are  115,000  victims  of  this  greatest 
catastrophe  of  all  time.  Because  the  ruin  is 
catastrophic  is  no  reason  to  undervalue  this 
universal    sympathy.     I    would    only    that    the 


218  An  American  Transportation  System 

great  heart  of  my  people  might  find  a  vibrant 
chord  for  the  suffering  of  the  more  than  100,000, 
who,  before  this  year  shall  close,  will  have  been 
victims  of  our  railway  folly.  For  mark  you, 
there  is  this  distinction  between  the  horror  of 
Messina  and  the  deadly  grind  of  our  railways: 
no  human  power  could  have  stayed  the  former 
but  the  latter  is  preventable.  Nothing  stands 
between  its  recurrence  and  its  prevention  except 
"cost." 

Legislation  Concerning   Railway  Adfquacy 

If  it  were  my  purpose  to  write  of  legislation 
intended  to  compel  our  railway  corporations  to 
furnish  the  country  adequate  transportation 
facilities,  this  section  might  as  well  not  be  written. 
The  page  is  a  blank.  Yet  whether  you  consider 
it  from  the  standpoint  of  profit  to  the  railways, 
or  from  the  higher  standpoint  of  the  general 
industrial  development  of  the  country,  there  is 
no  matter  of  greater  importance  than  adequacy 
of  transportation.  It  is  obvious  that  if  the  rail- 
ways cannot  handle  all  the  traffic  which  is  offered 
to  them,  they  must  lose  the  profit  which  would 
have  been  derived  from  what  they  cannot  handle. 
It  is  equally  obvious  that  if  transportation  facil- 
ities fail  to  keep  pace  with  industrial  growth 
and  development,  these  must  be  arrested.  Rail- 
way safety  is,  indeed,  comparable  in  importance 


Attempts  to  Correct  Wrongs      219 

with  adequacy,  although  for  another  reason. 
But  luckily  lit  so  happens  that  the  very  changes 
which  will  bring  railway  safety,  will  also  bring 
railway  adequacy. 

It  was  because  \1  believe  that  the  insecurity 
of  our  railways  has  not  been  brought  home  to 
the  people,,  that  I  wrote  the  long  and  tiresome 
section  on  that  subject.  From  some  cause,  those 
who  have  written  on  railway  matters,  have  not 
considered  railway  accidents  of  importance.  At 
least  I  can  come  to  no  other  conclusion  from  an 
examination  of  the  works  which  I  have  been  able 
to  get.  Tin  two  of  the  greatest  standard  works,  the 
subject  of  railway  accidents  is  not  even  referred 
to,  nor  does  Professor  Ripley  give  it  any  place  in 
his  admirable  collection  of  Railway  Problems,  j 

One  will  find  the  same  lack  of  consideration 
of  the  subject  of  railway  adequacy.  It  seems 
to  be  a  matter  which  does  not  seriously  impress 
itself  upon  either  the  people  in  general  or  students. 
Yet  that  such  lack  of  railway  adequacy  exists, 
admits  of  no  doubt.  The  fact  comes  to  us  from 
all  authoritative  sources,  and  its  existence  is  de- 
nied by  none.  In  the  early  portion  of  this  volume 
some  of  the  facts  were  stated.  I  have  since  re- 
ceived the  1907  report  of  the  Interstate  Commerce 
Commission,  from  which,  on  this  subject,  the 
following  is  quoted. 

The  whole  problem,  involving  insufficient  car  and 


22  o  An  American  Transportation  System 

track  capacity,  congested  terminals,  slow  train  move- 
ment, and  other  incidents,  may  be  said  to  be  due  to  the 
fact  that  the  facilities  of  the  carriers  have  not  kept 
pace  with  the  commercial  growth  of  the  country. 
One  eminent  railroad  president  has  estimated  that 
during  the  period  from  1895  to  1905  the  traffic  of- 
fered for  carriage  in  the  United  States  increased  no 
per  cent.,  while  during  the  same  period  the  instrumen- 
talities for  handling  this  traffic  increased  only  20 
per  cent. 

Powers  of  congress  to  compel  railway  adequacy 

In  1906  the  Interstate  Commerce  Commission  in 
its  report,  admitted  that  it  was  powerless  to  afford 
any  relief  to  the  multitude  of  shippers  who  had 
appealed  to  it  for  some  remedy  against  the  in- 
ability of  our  railways  to  handle  the  freight 
offered  them.  There  was  not  only  no  law  of 
congress  authorizing  the  Commission  to  compel 
the  railways  to  increase  their  facilities,  but  the 
Commission  was  also  forced  to  admit  that  it  was 
unable  to  recommend  to  congress  any  legislation 
which  would  meet  the  case. 

Nevertheless,  congress  is  not  without  authority 
to  enact  laws  calling  upon  the  railways  to  increase 
their  transportation  facilities.  The  same  author- 
ity— to  regulate  commerce  among  the  several 
states — which  permitted  congress  to  enact  the 
safety  appliance  law  requiring  railways  to  use 
automatic  couplers,  airbrakes,  etc.,  is  ample  to 


Attempts  to  Correct  Wrongs      221 

enable  congress  to  enact  laws  regulating,  in  any 
and  all  respects,  the  physical  operations  of  inter- 
state railways.  Congress  could  enact  laws  re- 
quiring such  railways  to  do  any  of  the  following 
acts:  to  put  in  use  the  block  signal  system; 
to  use  rails  of  any  weight,  standard  or  quality; 
to  make  roadbeds,  bridges  and  structures  of  any 
strength  or  material;  to  make  their  crossings 
with  one  another  and  with  highways  so  that  they 
would  not  be  on  the  same  grade;  to  double  track 
their  roads ;  or  to  do  any  other  act  or  thing  calcu- 
lated to  bring  about  greater  safety  or  adequacy. 
Yet  on  all  these  subjects  congress  has  been  as 
silent  as  the  Sphinx;  and  with  only  minor  and 
unimportant  exceptions,  the  state  legislatures 
have  been  equally  silent. 

Why  congress  has   been   silent 

It  is  not  for  me  to  say  why  congress  has  failed 
to  exercise  its  undoubted  authority  to  enact 
laws  compelling  our  railways  to  bring  about  the 
greatest  attainable  safety  and  efficiency.  Yet 
if  one  were  to  speculate  on  that  subject,  he  would 
probably  conclude  that  the  main  cause  for  this 
legislative  inactivity,  is  found  in  our  universal 
faith  in  the  great  American  principle  of  legislative 
non-interference  with  industrial  enterprises.  With 
many  a  deep  drawn  sigh,  we  console  ourselves 
for  our  cowardice  and  ignorance,  by  the  blessed 


222  An  American  Transportation  System 

belief  that  it  is  best  to  leave  it  to  the  railways  to 
make  these  changes  at  such  times  as  to  them  may 
seem  most  proper.  These  inexpensive  changes 
like  the  automatic  coupler,  congress  dared  force  the 
the  railways  to  adopt,  but  when  it  came  to  changes 
involving  considerable  expenditures,  like  the 
block  system — which  the  Commission  has  been 
urging  on  congress  for  years — action  no  more 
pronounced  could  be  expected,  than  a  resolution 
authorizing  an  investigation.  And  if  you  speak 
of  enactments  compelling  railways  to  remove 
their  grade  crossings,  or  double  track  roads,  go 
into  the  depths  of  the  forest  where  your  voice 
will  be  heard  only  by  your  own  ears. 

Why   our   railway   system   has  fallen   behind   the 
needs  of  the  country 

This  country  affords  a  particularly  good  illustra- 
tion of  the  dual  phase  of  national  industrial 
growth.  There  is  what  may  be  called  the  old 
growth — the  fairly  constant  growth  of  the  portions 
of  the  country  which  have  been  settled  for  varying 
lengths  of  time.  This  appears  from  the  continuous 
growth  of  manufacturing  industries,  of  industrial 
cities,  and,  to  a  less  extent,  from  the  growth  of 
agriculture  in  the  older  portions  of  the  country. 
Then  there  is  what  may  be  called  the  new  growth — 
the  continuous  exploration  and  development  of 
new  territory.  '  It  is  justly  expected  of  trans- 
portation that  it  will   grow   in   correspondence 


Attempts  to  Correct  Wrongs      223 

with  these  two  kinds  of  industrial  growth.  In 
the  attempt  of  our  railways  to  do  this,  they  have 
been  subjected  to  enormous  burdens  and  strains 
both  physical  and  financial.  The  result  would 
appear  to  be  that  they  have  failed  in  the  old 
kind  of  growth — in  the  older  portions  of  the  coun- 
try— in  the  prime  qualities  of  safety,  adequacy 
and  expedition,,  while  their  capacity  for  continuous 
extension  has  not  kept  up  with  the  new  growth 
of  the  country.  If  one  might  venture  to  throw 
these  failures  into  figures,  the  showing  would  be 
something  as  follows.  In  the  matter  of  safety, 
our  railways  are  about  90%  below  absolute  safety. 
That  is,  there  is  inherent  in  railway  operation 
under  the  best  known  conditions,  about  10% 
of  our  present  unsafety.  By  employing  these 
best  known  means  of  avoiding  accidents,  we 
could  reduce  them  about  90%.  In  the  matter  of 
adequacy,  it  is  alleged  by  the  best  authorities 
that  we  are  about  33%  below  requirements, 
though,  if  it  be  true  that  the  traffic  offered  from 
1895  to  1905  increased  110%  while  facilities  for 
handling  it  increased  only  20%,  it  may  be  doubted 
whether  the  alleged  percentage  of  inadequacy  be 
not  too  low.  In  point  of  expedition  in  freight 
movement,  I  would  not  like  to  make  a  guess  as 
to  how  far  we  are  behind;  but  since  expedition 
depends  upon  safety  and  adequacy,  it  may  well 
be  estimated  that  we  are  50%  slower  in  freight- 
movement  than  we  should  be.     Increased  expedi- 


224  An  American  Transportation  System 

tion  can  come  only  with  greatly  increased  and 
strengthened  trackage,  and  structures,  and  with 
additional  yards,  terminals,  etc.  Nor  can  any 
man  tell  how  many  miles  of  new  roads  will  be 
required  to  be  built  each  year;  but  if  we  can 
judge  by  past  experience,  not  less  than  5000 
miles  of  single  track  alone  per  annum,  will  be 
required  for  many  years  to  come.  For  it  must 
not  be  imagined  that  this  new  mileage  is  required 
only  in  the  unexplored  regions  of  the  United 
States;  there  are  many  of  the  older  parts  of  the 
country  in  need  of  additional  roads.  This  coun- 
try will  not  be  adequately  supplied  with  railways, 
until  every  inhabitable  portion  of  it  is  within 
reasonable  reach  of  the  facilities  railways  afford. 

Seeing  this  ever  increasing  demand  for  railways 
— for  better,  safer  and  more  adequate  old  railroads, 
and  for  more  and  ever  more  and  better  new  rail- 
ways; I  ask  you  these  simple  questions:  "  Is  not 
this  a  fine  country  in  which  to  build  railways? 
Do  you  know  of  any  other  country  in  which  there 
is  more  traffic  offered  to  railways  than  they  can 
handle?  Do  you  know  of  any  country  which 
offers  such  future  inducements  to  the  railway? 
Is  there  not  every  incentive  in  this  country  to 
build  the  best  railways?  Why,  then,  have  our 
roads  lagged  behind  the  rest  of  the  world  in  safety, 
and  why  have  they  thus  fallen  behind  the  needs 
of  the  country  in  adequacy  of  facilities?" 

From  among  the  multitude  of  reasons  which 


Attempts  to  Correct  Wrongs      225 

might  be  given  accounting  for  the  condition  in 
which  we  find  our  railway  systems  to-day,  there 
are  three  of  paramount  importance. 

1. — The  uncertain  position  which  our  railways 
occupy  in  the  public  eye. 

2. — The  failure  of  co-ordination  among  our 
transportation  systems. 

3. — The  inherent  weakness  in  the  American 
railway  financial  scheme. 

All  these  have  tended  to  arrest  railway  develop- 
ment, to  make  it  inefficient  and  to  make  it  ignore 
the  public  welfare.  Let  us  consider  these  develop- 
ment-arresting forces. 

Legislation  Concerning  Railway  Rates 

The  impressiveness  of  railway  charges 

It  was  mentioned  in  the  last  section,  that  neither 
railway  unsafety  nor  railway  inadequacy,  seems 
to  have  impressed  itself  upon  people  in  general, 
or  upon  learned  writers,  or  upon  the  legislators. 
But  a  like  complaint  cannot  be  made  in  the  matter 
of  the  charges  which  our  railways  have  made  for 
their  services.  An  army  of  ten  thousand  might 
be  slaughtered  each  year  and  a  hundred  thou- 
sand wounded,  the  country  might  be  mulcted 
in  extensive,  widely  distributed,  losses,  and  its 
industrial  development  seriously  arrested  by 
railway  inadequacy,  and  not  excite  our  special 

IS 


226  An  American  Transportation  System 

wonder;  but  when  we  reach  into  our  pockets  and 
fetch  out  good  money  with  which  to  pay  freights 
and  fares,  the  matter  comes  directly  home  to  us. 

And  it  is  all  so  one-sided.  There  is  no  back 
talk  about  it.  We  cannot  haggle  over  the 
price  and  bargain  with  the  railway  about  its 
charges.  Unless  we  are  legislators,  or  politicians, 
or  newspaper  men,  or  preachers,  or  influential 
shippers,  the  railway  demands  and  we  pay.  Nor 
is  there  much  credit  extended.  The  railway  does 
business  on  a  cash  basis.  All  this  is  well  calculated 
to  arouse  our  resentment,  and  we  take  it  out  in 
anti-rate  legislation. 

In  the  matter  of  complaints  against  railway 
charges,  there  are  two  peculiarities  which  seem 
to  me  worthy  of  mention.  One  is,  that  it  is 
always  the  charges  which  the  railway  makes  me 
for  carrying  the  particular  goods  which  /  make, 
or  in  which  /  deal,  which  I  am  sure  are  outrageous. 
I  do  not  care  a  fig  what  the  railway  charges  my 
neighbors  so  long  as  it  charges  me  less.  The 
other  is,  that  it  is  always  the  discrimination 
which  the  railway  shows  against  my  town  which 
makes  me  mad.  I  do  not  care  a  rap  about  the 
discrimination  which  it  shows  against  other 
towns.  What  I  demand  is  that  my  town 
shall  have  the  best  of  it  in  the  way  of  railway 
charges.  These  two  peculiarities  of  human  na- 
ture, serve  to  keep  up  the  connection  between  the 
present  Christian  era  and  a  past  not  too  distant. 


Attempts  to  Correct  Wrongs      227 

And  you  will  see  these  peculiarities  cropping  out 
in  a  larger  way,  when  you  look  at  the  various 
sections  of  the  country.  New  England,  in  the 
matter  of  freight  rates,  is  fully  as  alive  to  its 
own  interests  as  is  the  Northwest,  the  Southwest 
or  the  Pacific  Coast.  Complaints  against  railway 
rates  may  be  said,  in  a  general  way,  to  consist 
most  largely  in  a  scramble  on  the  part  of  each 
individual,  each  town,  each  community,  each 
state  and  each  section  for  special  privileges. 

Absence  of  definite  legislative  policy  in  rate-making 

If  one  were  compelled  to  choose  between  a  bad 
but  fixed  legislative  policy,  and  a  vacillating, 
uncertain,  policy,  one  would  hardly  hesitate  to 
take  the  former.  You  can  measurably  adjust 
yourself  to  almost  any  kind  of  a  fixed  policy, 
but  you  can  only  oscillate  under  a  vacillating 
policy.  One  who  has  to  spend  most  of  his  time 
dodging  bricks,  can  scarcely  be  expected  to  have 
enough  time  left  to  perform  his  duties.  While 
the  people  have  never  had  the  courage  to  establish 
a  fixed  policy  in  accordance  with  which  the  rail- 
ways could  work,  the  railways  have  been  compelled 
to  live  under  the  constant  menace  of  vicious 
legislation,  some  of  which  has  been  realized. 
Chiefly  this  has  been  along  the  line  of  the  curtail- 
ment of  railway  earnings. 

Not  that  I  would  have  it  understood,  that  it 


228  An  American  Transportation  System 

should  be  left  to  the  railways  solely  to  say  what 
their  charges  should  be.  Railways  are  essentially 
monopolies,  and  the  only  limit  to  the  charges 
which  a  monopoly  will  make  is  the  fear  that  it 
will  lose  its  position.  And  this  fear  is  by  no 
means  so  serious  as  those  who  control  monopolies 
would  have  us  believe. 

What  I  complain  of  is:  (i),  that  there  is  no 
legislative  power,  and  therefore  no  other  power, 
in  this  government  which  can  conclusively  make 
railway  rates;  and  (2),  that  there  has  never  been 
any  principle  governing  legislative  rate-making. 

Neither  can  any  state,  nor  any  commission 
of  any  state,  nor  congress,  nor  any  commission  of 
congress,  definitely  and  finally  legislate  as  to 
railway  rates.  True,  they  may  all  make  rates 
to  their  hearts' content,  but  unless  the  rates  which 
they  make  happen  to  be  reasonable,  their  labors 
are  null;  for  whether  rates  are  reasonable,  under 
the  law  as  we  have  it  now,  is  not  a  legislative 
question,  but  a  judicial  question,  and  in  every 
case,  a  question  for  the  Supreme  Court  of  the 
United  States.  Therefore,  if  the  said  Supreme 
Court  determines  that  a  legislative-made  rate 
is  reasonable,  it  stands;  if  it  determines  that  it 
is  not  reasonable,  it  stands  not. 

But  that  is  not  all.  The  Supreme  Court  is  not 
an  administrative  body  which  sits  to  make  rates. 
It  sits  solely  to  determine  whether  a  particular 
rate  is  or  is  not   reasonable.     If  it  determines 


Attempts  to  Correct  Wrongs      229 

that  a  certain  rate  is  not  reasonable,  it  does  not 
go  on  and  determine  what  rate  would  be  reason- 
able. The  Supreme  Court  simply  sends  the 
matter  back  to  the  legislature  to  make  another 
guess.  But  neither  the  legislatures  nor  the  rail- 
ways are  able  to  guess  what  the  Supreme  Court 
will  guess  is  a  reasonable  rate.  The  result  is 
that  the  railways  are  being  constantly  held  up 
between  the  devil  and  the  deep  sea. 

Need  I  add  that  this  condition  introduces 
inextricable  confusion  into  railroading.  No  rail- 
way knows  where  it  is  to  come  out  at  the  end  of 
a  year.  Meanwhile  the  stock  gamblers  gamble  on 
the  forthcoming  decision  of  the  Supreme  Court. 
All  the  railroads  know  is  that  they  cannot  make 
rates,  the  legislatures  cannot  make  rates,  the 
congress  cannot  make  rates,  the  commissions 
cannot  make  rates,  which  will  be  conclusive. 
And  yet  while  none  of  these  legislative  bodies 
can  make  rates  which  are  conclusive,  the  whole 
blessed  fifty  of  them  can  make  annual  stabs  at 
rate-making.  The  very  sum  and  limit  of  Ameri- 
can intelligence  on  the  subject  of  rate-making 
reaches  no  further  than  this:  that  nine  elderly 
gentlemen  in  long  robes  may  give  it  as  their  opin- 
ion, that  a  certain  rate  is  or  is  not  reasonable. 

Since  the  rates  charged  provide  the  only  revenue 
whereby  the  railways  live,  it  is  little  wonder  that 
in  this  uncertainty  as  to  incomes,  railway  develop- 
ment  has   been  arrested.     The  wonder  is  that 


230  An  American  Transportation  System 

we  have  been  able  to  build  railways  at  all  under 
such  a  system. 

Is  it  not  rather  remarkable  that,  though  we 
have  had  the  railway  with  us  for  upwards  of 
three-quarters  of  a  century,  we  have  been  unable 
to  arrive  at  any  more  definite  or  fixed  policy  as  to 
the  charges  they  may  make,  than  that  they  shall 
be  such  as  appeal  to  a  judge  on  the  bench  as  being 
reasonable?  Is  this  not  rather  as  though  we 
expect  infallibility  in  a  judge?  But  this  aside, 
if  charges  are  to  be  reasonable,  then  they  must 
be  reasonable  as  to  something.  Shall  they  be 
inherently  reasonable — shall  each  charge  be  rea- 
sonable considered  as  to  itself  alone?  Or  shall 
charges  be  reasonable  as  compared  to  each  other  ? 
Or  shall  charges  be  reasonable  as  to  the  capitaliza- 
tion of  the  railway?  Or  as  to  the  cost  to  the  rail- 
way of  perf ornaing  the  service  ?  Or  as  to  the  value 
of  the  service  to  the  shippers  ?  There  is  no  one  of 
these  tests  which  will  stand  criticism  for  a  moment 
nor  will  they  all  combined.  The  simple  fact  is 
that  there  is  nothing  about  a  railway  charge  which 
has  anything  to  do  with  reasonableness.  //  we 
are  to  have  railways,  charges  must  be  sufficient  for 
thetr  support. 

Railway  revenue,  rates  and  classification  of  services 

There  are  three  ideas  which  are  apt  to  tumble 
into  the  mind  and,  being  duly  mixed  up,  land  us 
only  in  confusion.    They  are  railway  revenue, 


Attempts  to  Correct  Wrongs      231 

railway  rates  and  railway  classification  of  services. 
Railway  revenue  is  the  equivalent  of  railway 
income.  It  is  the  total  sum  which  a  railway 
collects,  and  out  of  which  it  pays  its  expenses. 
The  phrase  "railway  rate"  is  a  mere  abstraction. 
It  means  nothing  by  itself.  It  becomes  important 
only  when  it  is  attached  to  a  particular  thing 
which  is  to  be  carried  by  the  railway  a  particular 
distance.  And  this  particular  thing  may  be  any 
one  of  ten  thousand  different  things  which  are 
offered  to  the  railway  for  carriage. 

Now,  what  is  absolutely  necessary  to  a  railway 
is,  that  it  have  "  revenue  "  sufficient  for  its  support. 
How  this  sufficient  revenue  is  raised  is  a  matter 
of  secondary  importance;  the  all-important  thing 
is  that  it  be  raised.  But  it  must  be  raised  by 
the  aggregate  of  charges  made  for  each  item  of 
service  rendered.  Obviously  then  the  only  thing 
of  importance  to  the  railway  is,  that  this  aggregate 
revenue  shall  be  so  distributed  over  the  various 
services  it  renders  that  the  aggregate  shall  not  be 
imperiled.  Subject  to  this,  the  state  may  dis- 
tribute the  specific  charges  according  as  its  public 
policy  may  dictate.  And  that  is  all  there  is, 
or  ever  was,  in  the  "reasonableness"  of  railway 
rates.  It  is  purely  a  question  of  public  policy.  It 
could  make  no  particular  difference  to  the  railway 
if  it  carried  everything  for  nothing,  or  everything 
at  exactly  the  same  rate  per  hundred  pounds,  or 
some  things  at  one  rate  and  some  things  at  a 


232  An  American  Transportation  System 

different  rate,  so  long  as  the  aggregate  required  was 
made  up  from  some  source.  And  for  the  same  rea- 
son it  would  make  no  difference  whether  it  charged 
the  same  amount  to  carry  the  same  quantity  of 
the  same  thing  a  hundred  or  a  thousand  miles. 
But  since  there  is  no  one  to  guarantee  the  railway 
that  its  aggregate  of  charges  will  be  sufficient 
for  its  support,  or  that  any  deficit  will  be  made 
up;  it  makes  a  world  of  difference  to  it  whether 
the  state  shall  tinker  with  established  schedules, 
so  that  the  equilibrium  of  rates  be  overthrown 
and  the  aggregate  collections  be  insufficient  for 
railroad  support.  For  the  railways,  as  the  result 
of  years  of  experience  in  traffic  movements,  have 
classified  a  large  number  of  the  different  kinds  of 
freights  offered  for  carriage,  so  that  some  of  the 
classes  pay  very  low  rates  and  some  of  them  very 
high  rates;  in  addition  to  which  classified  freights, 
there  is  an  enormous  amount  in  which  each  kind 
of  freight  is  a  "class"  by  itself;  and  to  all  these 
different  classes  and  kinds  of  freight,  rates  have 
been  applied  which  at  once  accomplish  the  double 
purpose  of  permitting  all  kinds  of  freight  to  move 
at  prices  remunerative  to  the  shipper,  and  which 
in  the  aggregate  will  support  the  road. 

The  process  of  rate-making 

The  process  of  rate-making,  therefore,  involves 
three  ideas.  First,  the  segregation  of  freight 
into  classes  or  groups.     Second,  the  application 


Attempts  to  Correct  Wrongs      233 

of  a  rate  to  each  class  or  kind  which  shall  permit 
of  its  movement  profitably  to  the  shipper,  and 
the  aggregate  whereof  will  support  the  road. 
Third,  varying  aggregate  charges  for  the  carriage 
of  the  same  kind  of  freight  different  distances. 

It  is  not  my  purpose  to  go  into  the  details  of 
rate-making,  nor  would  any  purpose  be  served 
by  so  doing  as  far  as  this  book  is  concerned.  The 
all-important  thing  to  be  borne  in  mind  is  this: 
in  any  rational  system  of  rate-making,  all  else 
must  be  subordinated  to  the  necessity  that  the 
aggregate  of  charges  support  the  road.  If  any 
other  principle  than  this  prevails,  you  cannot  have 
real  railroads  though  you  may  have  things  which, 
while  being  called  railroads,  are  in  reality  nothing 
but  stock-gambling  enterprises.  It,  therefore, 
behooves  our  wise  legislators,  who  are  always 
decrying  stock  gambling,  to  see  to  it  that  they  do 
not  increase  the  evil  they  deplore  by  an  ill-advised 
impulse  to  reduce  rates.  On  the  contrary  let 
their  zeal  be  expended  in  hastening  the  time  when 
the  recognized  principle  and  policy  of  this  country 
shall  be,  that  railway  rates  shall  at  all  times  be 
sufficient  to  pay  an  honest  income  on  the  honest 
dollars  invested  in,  or  required  for  investment 
in,  American  railways. 

Legislation  Concerning  Railway  Competition 
An  unco-ordinated  railway  system 
A  highly  complex   mechanism    is    said  to  be 


234  An  American  Transportation  System 

co-ordinated  when  all  its  multitudinous  parts 
work  in  harmony  to  accomplish  a  desired  end. 
When  such  a  complex  mechanism  becomes  co- 
ordinated, it  works  automatically.  The  most 
perfectly  co-ordinated  mechanisms  known  are 
living  organisms.  So  perfect  are  they  that  all 
their  functions  are  performed  without  the  know- 
ledge of  the  organism.  For  instance,  a  living 
organism  is  an  automatically  carried  on  chemical 
laboratory,  wherein  the  tests  are  so  infinitely 
delicate  that  they  defy  the  knowledge  of  the  most 
skillful  human  chemist  to  repeat  them.  Also 
you  will  see  how  a  part  of  the  organism,  instantly 
adjusts  itself  to  any  demand  made  upon  it  or  upon 
any  of  its  partners.  The  nervous  system  flashes 
its  orders  to  any  or  all  parts,  before  we  have 
time  to  know  we  think. 

As  near  an  approach  as  possible  to  this  perfectly 
co-ordinated  living  mechanism,  would  I  have  our 
transportation  system;  or,  speaking  more  widely, 
our  distribution  system,  of  which  our  transporta- 
tion system  is  a  part.  Seeing  that  the  accom- 
plishment of  a  desired  end  is  attained  by  the  most 
perfect  and  harmonious  organization,  co-operation 
and  co-ordination  of  all  the  parts  engaged,  it 
cannot  but  appear  remarkable,  that  the  policy 
of  our  legislation  has  been  to  keep  the  parts  of  our 
transportation  system  antagonistic  to  one  another 
— to  compel  them  to  pull  and  haul  against  one 
another. 


Attempts  to  Correct  Wrongs      235 

As  against  the  conception  of  a  combined,  co- 
ordinated transportation  system,  the  people  and 
the  legislatures  have  persistently  fostered  the 
conception  of  competing,  unco-ordinated,  dis- 
jointed individual  railways.  To  competition  they 
looked  for  cheap  rates.  To  competition  they 
looked  for  the  prevention  of  railway  monopoly. 
We  seem  never  to  have  taken  into  consideration 
that  under  destructive  railway  competition,  other 
abuses  might  arise  even  more  disastrous  in  their 
effects  than  the  high  rates  which  attend  unre- 
strained railway  monopoly.  Nor  have  we  consid- 
ered that  by  blocking  the  natural  and  legitimate 
methods  of  railway  combination,  we  have  but 
bred  an  unnatural  and  bastard  method  of 
combination.  Much  less  did  we  ever  consider 
that  we  might,  by  means  of  legislation,  have 
provided  the  way  for  legitimate  and  proper  co- 
ordinate action  among  our  disjointed  railways. 
As  is  usually  the  case,  a  dominant  idea  had  to  run 
its  course.  We  were,  and  are  yet  largely  possessed 
by  the  idea,  that  railway  competition  was  and 
is  the  cure  for  all  railway  ills.  And  this  is  true, 
notwithstanding  the  most  indubitable  evidence 
that  lack  of  railway  co-ordination  has  been  and 
is  the  main  cause  of  most  of  our  railway  ills. 

What  is  railway  competition  ? 
Railway  competition  may  be  said  to  exist  when 


236  An  American  Transportation  System 

two  or  more  railways  serve  the  same  places,  or  the 
same  territory,  and  each  offers,  or  attempts  to 
offer,  lower  rates  or  superior  service  to  the  travelers 
and  shippers  between  the  two  places,  or  generally 
within  the  territory.  Every  act  on  the  part  of 
the  railways  which  tends  to  stifle  competition 
among  them,  is  prohibited  by  the  laws  of  nearly 
every  state  and  by  the  laws  of  congress,  and  heavy 
penalties  are  provided  for  the  violation  of  these 
laws.  So  that  it  may  be  said  that  our  railways 
live  under  such  competition  as  our  legislatures 
can  impose. 

Now,  what  are  the  chief  faults  we  find  with 
our  railways?    They  are: 

(1)  That  our  railways  are  not  safe. 

(2)  That  our  railways  are  not  adequate  or 
expeditious. 

(3)  That  they  do  not  give  uniform  service  to 
all  shippers,  but  do  give  rebates  to  some. 

(4)  That  their  rates  are  unfairly  favorable  to 
some  places. 

(5)  That  their  rates  are  unreasonable. 

(6)  That  they  are  wasteful  alike  to  them- 
selves, the  investors  in  their  capital  and  to  the 
country. 

(7)  That  their  management  enables  their  trus- 
tees to  violate  their  duties,  making  railroading 
synonymous  with  stock  gambling. 

(8)  That  they  have  corrupted  American  politi- 
cal life. 


Attempts  to  Correct  Wrongs      237 

Has  competition  averted  railway  faults  ? 

Will  you  please  ask  yourselves  of  which  of  these 
faults  have  our  railways  been  cured  by  all  our 
legislation  forcing  competition?  After  thinking 
this  carefully  over,  I  cannot  but  think  you  will 
conclude  that  we  have  been  giving  our  railroads 
medicine  out  of  the  wrong  bottle.  Competition 
has  but  tended  to  increase,  and  in  many  cases 
has  been  the  sole  cause  of,  every  ill  from  which 
our  railways  suffer.  Has  it  made  our  railways 
safer?  If  so,  then  why  this  90%  of  unsafety? 
Has  it  made  them  more  adequate  or  expeditious  ? 
If  so,  then,  why  are  our  railroads  33%  behind  the 
country's  requirement?  But  in  the  matter  of 
safety  and  adequacy,  the  facts  are  that  it  is  those 
portions  of  the  country  where  competition  has 
been  the  slightest  or  where  railway  combination 
has  proceeded  furthest  in  spite  of  the  laws,  that 
safety  and  adequacy  are  at  their  best.  Naturally 
where  a  road  has  not  been  compelled  to  divide 
its  earnings  with  other  roads,  more  income  can 
be  devoted  to  improvements  and  betterments. 

But  has  competition  prevented  the  giving  of 
rebates?  On  the  contrary,  competition  has  been 
the  sole  cause  and  only  excuse  for  the  giving  of 
rebates.  This  is  a  subject  deserving  of  more 
consideration.  Is  it  not  obvious  that  if  two  roads 
are  serving  the  same  party,  there  can  be  no  open 
rate  competition  between  them?     In  order  that 


238  An  American  Transportation  System 

there  should  be  open  competition,  one  road  must 
give  a  lower  rate  than  the  other.  The  other  road 
must  meet  this  rate  or  go  out  of  business;  for  all 
the  traffic  will  go  to  the  road  giving  the  lower  rate 
as  certainly  as  water  will  run  down-hill.  The 
open,  published  rates  are  superseded  by  secret 
rates  offered  each  shipper.  But  secret  rates  are 
nothing  but  rebates.  Yet  this  is  the  only  kind 
of  rate  competition  which  can  possibly  exist. 

Here,  then,  is  the  situation.  Congress  makes  it 
a  crime  for  railways  to  agree  on  rates.  All  rates 
must  be  open,  published,  rates.  But  all  open, 
published,  rates  between  carriers  serving  the  same 
patrons  must  be  the  same,  else  the  lowest  will 
get  all  the  business.  But  there  is  no  competition 
where  all  carriers  serve  on  the  same  terms.  The 
only  kind  of  competition  possible  is  such  as  comes 
from  the  granting  of  privileges  secretly.  Next, 
congress  makes  the  granting  of  rebates  in  any 
form  a  crime.  Hence  congress  forces  the  carriers, 
if  competition  is  to  exist,  to  commit  crimes. 

Now  suppose  that  all  the  railways  centering 
in  Chicago  were  under  one  ownership — that  one 
railroad  corporation  had  an  absolute  monopoly 
of  all  the  rail  carrying  business  to  and  from  that 
city;  can  you  imagine  that  that  railroad  would 
give,  or  have  the  slightest  incentive  to  give,  a 
rebate,  or  any  other  sort  of  special  privilege, 
to  any  shipper?  Can  you  imagine  that  the  rail- 
roads gave  rebates  to  the  Standard  Oil  Co.  because 


Attempts  to  Correct  Wrongs      239 

of  their  love  for  Mr.  Rockefeller?  Better  by  far 
say,  they  gave  rebates  in  spite  of  their  hate  for 
him.  Railroads  give  rebates  because  they  know 
that  if  they  do  not  their  competitors  will. 

In  short,  the  rebate  is  the  legitimate  offspring 
of  railway  competition.  It  has  always  existed 
where  competition  existed  or  was  even  threatened, 
and  it  always  will  exist,  so  long  as  competition 
exists.  New  rebate  devices  will  come  into  being 
to  meet  the  exigencies  of  legislation.  If  what 
is  wanted  is  a  square  deal  among  shippers,  you 
will  get  it  a  great  deal  quicker  by  a  law  compelling 
all  carriers  to  come  under  a  common  ownership, 
than  by  a  law  commanding  them  to  remain 
independent  and  competitive. 

Next,  has  competition  prevented  discrimination 
against  cities  and  localities?  On  the  contrary 
the  only  reason  any  place  ever  had  more  favorable 
railway  rates  than  another  place  was  exactly 
because  it  had  railway  or  water  competition. 
At  competitive  terminals  and  junction  points, 
railway  rates  have  been  low.  "There,"  you  say, 
"competition  has  been  a  good  thing.  There 
competition  has  brought  about  a  reduction  of 
charges."  Surely  it  has  lowered  rates  to  these 
points ;  but  that  it  has  been  a  good  thing  for  the 
country  I  deny.  On  the  contrary,  I  aver  that 
it  has  been  the  most  damnably  iniquitous  practice 
with  which  our  railways  can  be  charged.  It 
has  established  the  practice,  now  most  difficult 


240  An  American  Transportation  System 

to  eradicate,  of  carrying  freight  to  terminal  and 
competitive  points  at  prices  either  below  or 
perilously  near  the  actual  cost  of  turning  the 
wheels,  while  the  railway  losses  thus  sustained 
have  been  made  up  by  excessive  charges  to  all 
places  which  were  not  competitive  points.  This 
has  established  a  system  of  "place  rebates" 
as  cruel  and  unjust  and  far  more  extensive  in 
evil  effects,  than  the  system  of  rebates  to  individ- 
ual shippers. 

For  what  do  low  rates  to  one  town  and  high 
rates  to  another  town,  either  no  more  distant 
from  or,  as  frequently  happens,  ioo  to  500  miles 
nearer  the  initial  point  of  shipment,  mean?  Do 
towns  or  localities  ship  goods?  No;  it  is  the 
people  or  traders  of  towns  that  are  the  shippers. 
It  follows,  then,  that  the  people  or  traders  of 
all  non-competitive  points,  are  taxed  with  high 
rates  in  order  that  people  and  traders  of  other 
towns  may  have  low  rates.  As  railway  rates 
are  the  most  controlling  influence  upon  business 
to-day,  it  follows  that  where  these  towns  are 
rivals,  the  people  of  competitive  points  are  able  as 
effectually  to  crush  out  their  rivals  as  the  shipper 
receiving  rebates  is  to  crush  out  a  rival  who  does 
not  receive  rebates.  And  again  I  ask,  does  this 
practice  exist  because  the  railways  have  a  greater 
love  for  towns  where  their  respective  lines  happen 
to  meet  than  they  have  for  towns  elsewhere  on 
their  lines?    And  again  I  answer,  a  railroad  has 


Attempts  to  Correct  Wrongs      241 

neither  likes  nor  dislikes.  It  knows  no  more  of 
loves  than  of  hates.  It  cares  no  more  for  one 
individual  than  for  another.  Localities  are  but 
points  on  its  lines.  It  would  serve  the  devil  as 
quickly  and  as  well  as  the  archangel,  the  Holy 
City  no  better  than  Sodom.  Why  then  these 
specially  favored  cities?  Why  does  the  railway 
throw  the  burden  of  its  profit-making  on  interior 
and  non-competitive  points?  Why  is  every  com- 
munity along  its  line  which  is  not  a  junction 
point  and  every  inhabitant  not  near  a  competitive 
point,  mulcted  by  a  high  rate  to  support  the 
people  of  competitive  points  ?  The  answer  simply 
is:  because  inter-railway  and  water  competition 
have  forced  the  railways  to  the  imposition  of 
rates  having  these  effects.  You  will  never  get 
rid  of  these  wrongs,  until  the  last  shred  of  com- 
petition among  railways  and  between  rail  and 
water  transportation  has  been  banished  and  you 
have  a  transportation  system  which  will  not  re- 
quire that  nine-tenths  of  the  people  of  this 
country  be  taxed  to  support  the  other  tenth. 

Does  railway  competition  make  rates  reason- 
able? The  common  idea  is  that  low  rates  are 
reasonable  rates.  For  the  purpose  of  the  argu- 
ment, let  us  admit  that  this  is  the  right  idea. 
How,  when  and  where  does  competition  make 
low  rates?  It  makes  low  rates  to  competitive 
points ;  it  makes  high  rates  to  intermediate  points. 
It  does  not  in  the  least  alter  either  the  average 
16 


242  An  American  Transportation  System 

or  the  aggregate  of  rates.  The  principle  of  com- 
pensation applies.  If  railways  are  to  keep  out 
of  bankruptcy,  these  low  competitive  rates  must 
be  compensated  for  by  high  non-competitive 
rates.  No  railway  could  live  and  keep  out  of 
bankruptcy,  if  all  its  carrying  were  done  as  cheaply 
as  it  is  done  to  competitive  points.  But  railway 
systems  sometimes  are  competitors  to  a  greater 
or  less  degree  throughout  the  entire  range  of  their 
operations,  or  between  the  great  centers  furnish- 
ing the  largest  amount  of  traffic.  What  happens 
where  rate  competition  becomes  active  on  this 
large  scale?  We  have  then  what  are  called 
"cut-rate  wars." 

And  here  we  may  ask  the  sixth  question. 
Does  railway  competition  on  this  large  scale, 
diminish  the  wastefulness  which  we  have  seen 
to  characterize  our  railway  system?  Does  it 
tend  to  conserve  the  interests  of  investors  in 
railways?  Is  it  of  any  benefit  to  the  country  as 
doing  away  with  uneconomic  railway  methods? 
I  need  not  more  than  refer  to  the  fact  known 
to  every  intelligent  merchant  and  manufacturer, 
that  cut-rate  wars  are  utter  demoralizers  of 
business.  Nor  need  I  more  than  mention  the 
further  fact,  known  to  every  student  of  railway 
history,  that  railway  bankruptcies  in  the  past 
have  been  very  largely  brought  about  by  the 
destructive  competition  to  which  the  railways 
formerly  permitted  themselves  to  be  subjected. 


Attempts  to  Correct  Wrongs      243 

Destructive  railway  competition  has  been  one  of 
the  most  potent  forces  tending  to  demoralize,  if  not 
destroy  the  values  of  railway  securities.  It  creates 
therefore  a  gamblers'  paradise.  Instances  are  not 
rare,  where  competitive  roads  have  been  projected, 
or  even  actually  built  for  no  other  purpose  than  to 
influence  speculation ;  such  projects  bringing  with 
them  another  flood  of  worthless  securities,  sucking 
into  the  maelstrom  millions  of  savings. 

The  interaction  of  railway  securities  upon  one 
another  is  very  considerable.  Demoralization 
in  one  predominant  security  is  apt  to  extend  to 
several.  For  instance,  if  it  were  known  that 
the  Union  Pacific-Southern  Pacific  system  was 
to  have  its  lines  paralleled  by  a  company  suffi- 
ciently strong  financially  to  carry  out  such  a 
project,  it  can  scarcely  be  doubted  that  something 
close  to  a  panic  would  attack  the  Exchange. 
Finally  it  may  readily  be  understood  what  a  figure 
railway  competition,  or  threatened  competition, 
has  cut  in  the  political  corruption  of  the  country. 
Always  privileges  were  to  be  gotten,  or  privileges 
already  gotten  were  to  be  held  against  all  comers. 
At  once  there  is  an  appeal  to  legislatures,  courts, 
municipal  councils — to  every  place  where  political 
power  is  vested  with  the  authority  to  give  or 
withhold  favors. 

Has  competition  prevented  railway  monopoly? 
If  any  one  can  tell  of  any  unqualifiedly  good 


244  An  American  Transportation  System 

thing  which  has  resulted  from  railway  competition, 
I  should  like  to  hear  it.  Against  all  the  ills  it  has 
wrought,  there  is  the  claim  that  it  has  averted 
railway  monopoly.  Even  were  I  ignorant  of  the 
facts,  I  should  doubt  the  capacity  of  competition 
to  accomplish  this  end.  For,  as  above  said,  the 
railway  is  in  its  very  nature  essentially  a  monopoly. 
There  is  no  place  in  the  economy  of  a  country 
for  competitive  railways.  Either  a  railway  can 
serve  a  section  of  the  country  or  it  cannot ;  and  if 
it  cannot  it  is  because  it  is  not  a  railway.  But, 
this  aside,  we  have  but  to  read  the  history  of 
railway  combinations  since  the  enactment  of 
the  most  drastic  competition-forcing  legislation, 
to  learn  how  utterly  unavailing  such  legislation 
has  been  as  a  preventive  of  railway  consolidations 
and  the  establishment  of  the  railway  monopoly. 
At  the  time  that  these  laws  were  first  enacted,  the 
railways  were  themselves  just  beginning  to  real- 
ize the  fact,  that  the  success  of  transportation 
lay  in  the  inauguration  of  the  policy  of  "live 
and  let  live."  Before  that  time  the  pride  of 
individual  railway  corporations — the  apparent 
certainty  that  each  felt  that  it  could  beat  its 
enemies  by  the  sheer  brute  ability  to  stand 
losses  the  longest — had  rendered  approach- 
ments  among  railways  difficult  if  not  impos- 
sible. Finally  intelligence  began  to  be  substi- 
tuted for  brute  force.  The  railways  formed 
associations  of   various  kinds,  the  essential   fea- 


Attempts  to  Correct  Wrongs      245 

ture  of  which  was  the  doing  away  with  mutual 
throat-cutting. 

No  sooner  did  the  nation  perceive  that  the 
railways  were  "combining  to  stifle  competition," 
than  it  swept  down  upon  them  with  might  and 
main.  Of  course  specially  favored  competitive 
points  scented  trouble,  and  sent  up  a  mighty 
howl.  This  might  have  been  expected,  for  the 
very  competition  which  might  be  stifled  was 
the  competition  which  gave  them  advantage 
over  other  places.  But  why  the  whole  country — 
which  might  have  hoped  for  some  relief  from  the 
unequal  distribution  of  the  railway  burden,  had 
the  railways  raised  rates  to  competitive  points — 
should  have  joined  in  the  hue  and  cry,  it  is  diffi- 
cult to  see.  However,  the  whole  country  took 
it  up.  The  cry  was  "Down  with  railroad  pools! 
Down  with  all  combinations!  Down  with  all 
agreements  in  restraint  of  trade!"  And  almost, 
"Down  with  the  right  of  railway  managers  to 
recognize  each  other  on  the  street." 

Then  came  the  anti-pool,  anti-trust  laws,  with 
which  every  one  is  so  familiar  that  it  is  unneces- 
sary to  go  into  their  details.  So  far  as  the  railways 
are  concerned,  this  legislation  had  but  one  object; 
to  prevent  combination  among  them  and  to  force 
them  to  keep  up  competition.  It  is  only  with 
the  operation  of  these  laws  in  the  accomplishment 
of  their  purpose,  that  we  are  now  concerned. 
Their  purpose  was  to  keep  railroads  at  each  other's 


246  An  American  Transportation  System 

throats.  The  result  has  been  to  drive  the  rail- 
roads into  each  other's  arms.  I  cannot  doubt 
that  when  congress  began  its  legislating,  there 
was  no  very  great  expectation  among  the  railways 
that  the  pools  would  be  lived  up  to.  But  the 
legislation  effectually  accentuated  the  necessity 
to  be  rid  of  competition.  As  every  one  knows, 
while  these  laws  have  been  in  full  force  and  effect, 
all  the  railways  have  passed  under  the  control 
of  a  few  systems,  which  are  themselves  closely 
interlocked.  As  hereinbefore  shown,  the  railways 
have  accomplished  this  by  the  simple  process 
of  buying  up  and  into  each  other.  And,  therefore, 
it  would  appear  that  neither  competition,  nor 
competition-forcing  legislation,  has  prevented  the 
railways  coming  together. 

Thus  the  first  step  in  the  evolution  of  an  Ameri- 
can Transportation  System  has  about  been  taken. 
Our  railways  have  passed  from  the  indefinite 
to  the  definite  stage — from  the  unintegrated  to 
the  integrated  stage.  From  independent  com- 
peting roads  they  have  emerged  into  consolidated 
roads — from  competition  to  combination.  This 
is  not  unlike  the  first  step  in  political  integration, 
when  independent  warring  tribes  combine  into 
a  more  or  less  compact  politico-social  unit.  Nor 
is  it  unlike  the  combination  among  the  thirteen 
independent  colonies,  to  form,  first  the  loosely 
jointed  Confederacy  and,  finally,  the  United 
States  of  America. 


Attempts  to  Correct  Wrongs      247 

But  integration,  or  aggregation,  is  but  one  of 
the  processes  in  evolution.  Unless  this  process 
is  accompanied  by  the  co-ordinate  action  of  the 
combining  roads,  we  shall  not  have  accomplished 
the  grand  end.  We  have  done  away  most  largely 
with  the  fighting,  but  we  have  as  yet  but  feeble 
conjoint  action.  Indeed  there  is  plenty  of  evi- 
dence that  the  great  railway  systems  are  still 
thinking  a  good  deal  more  of  themselves,  than 
they  are  of  transportation  as  a  whole.  In  this 
respect  our  great  railway  men  are  not  disclosing 
any  too  much  wisdom.  It  is  a  great  thing  to 
build  up  the  Union  Pacific  System.  It  is  a  great 
thing  to  build  up  the  Northern  Pacific  System, 
the  Pennsylvania  System,  the  Atchison  Sys- 
tem, the  Rock  Island  System,  the  Southern  Sys- 
tem, the  New  Haven  System.  But  it  is  a  greater 
thing  to  build  up  an  American  Transportation 
System.    ■ 

Meanwhile,  all  these  forces  naturally  tend  to 
the  inevitable  establishment  of  a  railroad  mono- 
poly. And  as  a  railroad  monopoly  we  must 
treat  it.  You  have  seen  how  idle  it  is  to  throw 
laws  in  the  way  of  the  natural  evolution  of  a 
railway  system.  It  seems  to  me  that  what  we 
want  is  not  obstructive  legislation,  but  construc- 
tive legislation,  which  will  wisely  guide  these 
systems  during  their  evolution;  so  that  during 
the  evolution,  neither  the  railways  nor  the  nation 
will  suffer  and  so  that  when  the  process  of  evolu- 


248  An  American  Transportation  System 

tion  is  complete,  we  shall  have  a  monopoly  fully 
recognizing  its  responsibility  to  the  people. 

The    American    Railway    Financial    Scheme 

Its  inherent  weakness 

If  you  search  for  the  main  reason  for  the  un- 
safety,  the  inadequacy,  the  lack  of  expedition,  the 
lack  of  growing  capacity  of  our  railway  system, 
you  will  find  it  in  the  inherent  weakness  of  our 
railway  financial  scheme.  If  you  search  for  the 
main  cause  of  the  wasteful  methods  of  our  rail- 
ways, of  the  losses  which  our  investors  in  railway 
securities  have  sustained,  of  the  abuses  of  their 
trust  by  railway  managers,  of  the  enormous  losses 
which  the  country  has  sustained  from  the  mis- 
management of  our  railways,  of  railway  bankrupt- 
cies and  stock  gambling,  you  will  find  it  in  the 
inherent  weakness  of  our  railway  financial  scheme. 

And  what  are  the  essential  features  of  the 
scheme  by  which  our  railways  have  been  financed  ? 
Let  me  premise  an  account  of  them  by  a  brief 
statement  of  the  financial  methods  which  have 
generally  prevailed  elsewhere.  In  some  countries, 
when  a  number  of  people  conclude  that  the  time 
is  ripe  for  the  construction  of  a  railway,  they  organ- 
ize a  company  for  that  purpose,  the  capital  stock 
of  which  is  fixed  at  about  the  amount  which  care- 
ful preliminary  estimates  show  the  road  will  cost. 


Attempts  to  Correct  Wrongs      249 

Subscription  to  the  capital  stock  is  then  opened 
and  each  of  the  original  promoters  subscribe  the 
amount  which  he  thinks  he  cares,  or  is  able  to 
pay,  for,  the  public  being  also  generally  invited 
to  subscribe.  These  subscriptions  are  usually 
payable  in  instalments  as  the  company  requires 
the  money  for  construction  and  other  purposes. 
It  not  infrequently  happens  that  the  estimated 
cost  of  the  enterprise  was  too  low,  and  that 
additional  capital  is  required.  This  additional 
capital  is  acquired  in  several  ways,  the  preferable 
method  being  to  increase  the  amount  of  stock 
open  to  subscription.  But  it  may  be  that  addi- 
tional subscriptions  cannot  be  procured,  and  that 
the  company  is  compelled  to  offer  more  favorable 
terms  than  those  which  the  original  subscription 
carried.  The  essential  feature  of  this  more 
favorable  offer  consists  in  the  fact  that  subscribers 
are  entitled  to  a  fixed  return  on  the  shares  for 
which  they  subscribe,  and  that  this  fixed  return 
is  payable  out  of  the  income  of  the  company  before 
the  original  subscribers  are  entitled  to  any  divi- 
dends at  all.  This  amounts  practically  to  a 
pledge  of  the  income  of  the  road  in  favour  of  the 
second  class  of  subscribers.  Neither  the  franchise 
nor  the  physical  properties  of  the  company  is  ever 
encumbered  by  any  lien  under  this  system  of 
financing. 

The  result  of  this  method  is,  that  while  a  road 
may  never  be  able  to  earn  or  pay  dividends,  it 


250  An  American  Transportation  System 

can  never  become  bankrupt,  simply  because  it  owes 
no  debts  to  those  who  furnished  the  money  for  its 
construction.  Under  this  system,  no  subscriber 
ever  gets  his  stock  until  it  is  paid  for;  or,  to  state 
it  more  definitely,  the  stock  is  never  fully  valid, 
unless  it  has  paid  the  full  amount  of  the  sub- 
scription price  as  the  installments  have  been 
called  for.  There  is  another  essential  feature 
of  this  financial  system.  Income  is  not  diverted 
from  stockholders  for  the  purpose  of  making  new 
and  permanent  improvements,  but  the  capital 
required  to  make  these  is  raised  in  the  same  manner 
as  the  original  capital — by  the  issuance  of  stock. 
Thus  the  cost  of  the  physical  property  when  com- 
pleted, is  represented  by  the  securities  which  have 
been  issued. 

Now,  the  American  railway  financial  scheme  is 
about  the  opposite  of  that  just  mentioned.  In 
this  country,  if  a  number  of  persons  want  to  build 
a  railway,  they  form  a  corporation  with  a  capital 
stock  about  equal  to  what  they  expect  it  will  cost 
to  build  the  road.  This  capital  stock  is  "sub- 
scribed" by  the  few  persons  engaged  in  the  enter- 
prise. But  they  pay  in  to  the  treasury  of  the 
company  only  about  enough  money  to  make  the 
preliminary  surveys,  get  the  franchise  and  set 
the  enterprise  in  motion.  The  next  step  in  their 
program  is  to  authorize  an  issue  of  bonds  for 
about  the  amount  supposed  to  be  necessary  to 
build   and   equip  the  road.     This  is,   of  course, 


Attempts  to  Correct  Wrongs      251 

usually  about  the  same  amount  as  the  capital  stock. 
The  next  step  is  to  dispose  of  the  bonds,  and 
thereby  raise  the  capital  required  to  construct  the 
road.  There  are  two  ways  of  doing  this.  If  the 
organizers  of  the  scheme  are  men  of  wealth, 
they  cause  to  be  formed  another  corporation 
known  as  a  construction  company,  composed 
of  themselves  or  their  dummies.  Contracts  are 
now  made  between  the  railway  company  and  the 
construction  company,  by  which  the  construction 
company  agrees  to  build  the  road,  at  such  price 
as  the  two  companies  care  to  agree  upon,  and  it 
takes  its  pay  in  bonds,  with  or  without  a  bonus  of 
more  or  less  of  the  stock.  The  other  scheme  is 
to  sell  the  bonds  to  the  public.  The  essential 
feature  of  either  scheme  is  that  the  road  shall  be 
built  out  of  the  bonds,  or  their  proceeds,  the  stock 
going  to  the  promoters  of  the  enterprise  as  a  clear 
profit,  or  as  nearly  so  as  it  is  possible  to  make  it. 
Thus  the  road  begins  its  life  with  a  handicap  of 
twice  the  capitalization,  or  liabilities,  whichever 
you  choose  to  call  it,  that  it  should  have  had. 
This  is  weakness  No.  1.  It  is  now  launched 
as  a  railroad  though,  generally  speaking,  it  simply 
consists  of  ties  and  rails  laid  on  dirt  unballasted 
and  with  the  flimsiest  structures  that  will  hold  up 
a  train. 

I  do  not  say  that  all  railways  of  this  country 
were  started  or  made  by  the  above  process.  On 
the  contrary,  it  would  seem  that  in  the  very  early 


252  An  American  Transportation  System 

days  of  railway  building,  it  was  the  custom  for  the 
subscribers  to  the  capital  stock  to  pay  considerable 
part  of  their  subscription  in  money,  and  it  is  now 
not  uncommon  for  well  established  roads  to  sell 
their  stocks  for  value  when  they  wish  to  raise  money 
for  new  work.  What  I  do  say,  without  fear  of 
contradiction,  is,  that  the  overwhelming  majority 
of  American  railways  were  started  and  made  in 
strict  accordance  with  the  above  process,  and  that 
it  is  still  the  prevailing  custom  for  the  roads  to 
raise  capital  by  mortgaging  their  physical  proper- 
ties and  not  by  the  sale  of  stock. 

The  subsequent  and  successive  steps  in  our  rail- 
way financial  scheme,  have  been  but  duplications 
of  the  first  step,  with  such  variations  as  ingen- 
uity could  conjure  up.  To  raise  additional  capi- 
tal, second  mortgages  followed  first  mortgages, 
and  even  third,  fourth  and  fifth  mortgages  followed 
upon  the  same  property.  When  roads  were 
consolidated  they  were,  of  course,  covered  by  their 
original  mortgages,  and  the  consolidated  company 
found  it  necessary  to  provide  for  these  so-called 
underlying  bonds,  by  an  additional  mortgage 
covering  the  consolidating  roads.  Here  was  an 
opportunity  not  to  be  missed,  and  so  the  "con- 
solidated mortgage"  has  usually  been  made  for 
two,  three  or  four  times  the  amount  of  the  under- 
lying bonds.     Here  was  weakness  No.  2. 

Again,  if  the  roads  escaped  bankruptcy  in  the 
meantime,  these  bonds  had  to  be  refunded  as  they 


Attempts  to  Correct  Wrongs      253 

became  due.  This  refunding  was  provided  for 
by  what  is  called  a  "refunding  mortgage,"  which 
like  its  predecessors  was  usually  for  an  amount 
greatly  in  excess  of  all  pre-existing  liens,  the 
amount  in  excess  being  usable  u  for  the  purpose  of 
the  corporation."  Here  was  weakness  No.  3.  I 
need  not  follow  the  successive  stages  of  this  process, 
and  show  how  it  has  drawn  our  railways  ever 
nearer  and  nearer  to  the  pawn  shop.  It  is  sufficient 
to  say  that  with  the  invention  of  the  holding 
company,  came  the  issuance  of  hundreds  of 
millions  of  debenture  bonds,  unsecured  or  secured 
by  collateral — the  stocks  of  other  roads.  Nor 
need  I  more  than  call  attention  to  how  many 
roads,  pushed  to  extremities,  have  been  forced 
to  "  put  up"  their  own  unsalable  bonds  often  two 
for  one,  to  borrow  money  on  "collateral  trust" 
obligations;  nor  to  the  hypothecation  of  equip- 
ment nor  to  the  fact  that  hundreds  of  millions  of 
dollars  of  equipment  have  been  bought  after 
exactly  the  same  fashion  that  the  poor  buy  their 
furniture — on  the  installment  plan — secured  by 
equipment  trust  bonds.  Nor  need  I  tell  you  of  the 
many  roads  that  have  been  forced  directly  into 
the  pawnshop,  to  borrow  money  at  high  rates 
of  interest  on  " short  term  notes"  to  avert  immedi- 
ate financial  disaster.  If  any  more  infallible  sign 
of  the  collapse  of  the  American  railway  financial 
scheme  be  wanted,  it  will  be  found  in  the  fact, 
that   after  seven  years  of   most   unprecedented 


254  An  American  Transportation  System 

prosperity,  now,  in  a  period  of  universal  busi- 
ness depression,  our  railways  find  no  other  way 
to  save  themselves  except  by  increasing  their 
rates. 

If,  now,  you  will  look  back  over  the  history 
of  the  railways  of  this  country,  and  see  how  their 
path  is  strewn  with  railway  bankruptcies,  will 
you  tell  me  that  there  is  not  something  rotten  in 
our  American  railway  financial  scheme  ? 

Moreover,  here  is  a  new  force  to  be  reckoned 
with.  Massachusetts  and  New  York  have  created 
real  railway  commissions.  No  more  railway  bonds 
or  stocks  can  be  issued  in  those  states,  without 
the  approval  of  the  Commissions,  and  already 
in  the  last  year  they  have  refused  their  approval 
of  upwards  of  $100,000,000  of  new  bonds.  This 
was  the  last  straw.  There  is  no  escaping  the 
conclusion  that  the  American  railway  financial 
scheme  has  broken  down. 

Under  such  a  scheme  for  the  financing  of  our 
railway  projects,  the  wonder  is  not  that  railways 
have  been  poorly  built,  that  securities  have  been 
unstable  and  for  the  most  part  a  stock  gamble, 
that  bankruptcy  has  one  time  or  another  over- 
taken most  of  our  roads,  that  accidents  have 
been  ever  on  the  increase,  that  the  entire  sys- 
tem has  gradually  but  surely  fallen  behind  the 
requirements  of  the  country;  the  wonder  is 
that  the  system  so  financed  was  ever  built  at 
all. 


Attempts  to  Correct  Wrongs      255 

The  demands  on  our  railway  system 

And  what  are  the  demands  which  are  made 
upon  our  railway  system,  just  at  the  time  when 
it  finds  itself  most  helpless?  The  demands  are 
that  our  railway  system  be  brought  up  to  the 
requirements  of  the  country;  that  this  horror  of 
railway  accidents  shall  be  banished  and  this  33% 
of  inadequacy  be  made  good.  Where  is  the 
money  to  come  from  to  do  these  things  ? 

At  the  close  of  the  year  1907,  there  were  roughly 
speaking,  225,000  miles  of  main  track  railway 
in  the  United  States.  Of  these  only  about  20,000 
miles  were  second -tracked.  That  would  leave 
205,000  miles  deficient  in  the  element  of  safety 
which  can  be  supplied  only  by  providing  double 
tracks.  Practically  speaking,  all  the  railways  of 
this  country  cross  each  other  and  highways  on  the 
same  grade.  These  grade  crossings  must  be 
eliminated  to  remove  that  element  of  unsafety. 
As  for  the  block,  or  some  other  system  to  lessen 
the  danger  of  rear  end  collisions,  it  is  employed 
on  only  a  small  percentage  of  our  roads.  If  to 
these  demands  upon  our  railways,  you  add  the 
universal  necessity  for  the  increase  of  yard  and 
terminal  facilities,  and  the  fact  that  our  new 
railway  mileage  must  continue  to  grow  every  year 
for  many  years,  at  the  rate  of  about  5000  miles; 
you  will  get  some  idea  of  the  physical  and  finan- 
cial demands  that  are  pressing  upon  our  railway 
system  to-day. 


256  An  American  Transportation  System 

I  doubt  if  there  be  any  one  who  would  estimate 
that  the  total  changes  necessary  in  order  to  bring 
about  the  highest  degree  of  safety,  adequacy 
and  expedition  over  these  205,000  miles  of  road, 
would  require  less  than  an  expenditure  of  $25,000 
per  mile.  That  would  call  for  $5,125,000,000. 
In  addition  to  this,  the  yearly  railway  growth  will 
call  for  from  $300,000,000  to  $500,000,000  per 
annum,  if  these  new  roads  are  to  be  built  as  they 
should  be  built,  and  not  in  the  slipshod  manner 
which  has  characterized  past  construction.  We 
may  as  well  look  this  situation  squarely  in  the 
face ;  there  is  no  use  in  dodging  it. 

Is  it  reasonable  to  suppose  that  our  railways 
can,  under  existing  conditions  and  by  the  same 
financial  scheme  which  they  have  employed  in 
the  past,  raise  the  money  necessary  to  bring 
about  these  changes  and  continue  railway  growth? 
This  scheme  has  led  straight  to  bankruptcy  in 
the  past.  Is  there  any  reason  to  suppose  it  will 
not  do  so  in  the  future  ?  What  are  the  conditions 
to-day?  Is  there  any  better  known  fact,  than 
that  tens  of  thousands  of  miles  of  our  railways 
have  been  hanging  in  the  balance  during  the  past 
year,  and  that  bankruptcy  has  been  averted  solely 
by  reason  of  their  application  to  the  pawn  shop  ? 
Is  it  not  perfectly  understood  that  these  roads 
to  save  themselves  from  immediate  ruin,  have 
had,  practically,  to  place  themselves  in  the  hands 
of  their  enemies  ? 


Attempts  to  Correct  Wrongs      257 

But  this  is  not  all.  Say  that  this  condition 
applies  to  only  a  small  minority  of  our  roads. 
What  of  the  so-called  strong  roads?  Are  not 
they  as  well  as  the  weak  roads  already  plastered 
over  with  every  conceivable  and  some  inconceiv- 
able and  unmentionable  forms  of  debt?  Have 
not  they,  too,  borrowed  in  every  way  and  by 
every  device  which  ingenuity  can  invent?  And 
borrowed,  too,  not  solely  for  legitimate  railway 
purposes,  but  for  utterly  illegitimate  railway  pur- 
poses, as  to  invest  in  outside  industries,  not  to 
mention  the  borrowing  of  money  with  which  to 
speculate  in  Wall  Street! 

But  this  is  not  all,  either.  The  American  people 
are  not  to  be  made  fools  of  forever  and  forever. 
Not  only  has  the  borrowing  capacity  of  the  rail- 
ways greatly  diminished,  but  their  legal  capacity 
to  borrow  is  being  rapidly  curtailed.  The  state 
and  national  governments  will  not  forever  sit 
supinely  by  and  see  the  people  loaded,  year  after 
year,  with  this  railway  debt,  "  to,  repudiate  which 
is  a  national  dishonor";  and  at  the  same  time 
see  the  people  perennially  robbed  by  the  rotten- 
ness of  securities  put  upon  the  markets.  Already, 
as  pointed  out  above,  New  York  and  Massachu- 
setts require  the  approval  of  all  bond  and  stock 
issues  by  their  commissions,  and  it  would  not  be 
at  all  surprising  if  congress  would  soon  become 
sufficiently  awakened  to  such  a  sense  of  its  duty, 
as  to  require  all  interstate  roads  to  have  their 


258  An  American  Transportation  System 

bond  and  stock  issues  approved  by  the  Interstate 
Commerce  Commission. 

Thus  a  perfectly  legitimate  and  wise  law,  would 
at  once  have  the  effect  to  enormously  curtail,  if 
not  destroy,  the  borrowing  capacity  of  the  roads. 
For  mark  this,  it  has  been  only  by  virtue  of  the 
capacity  of  the  railways  to  issue  and  sell  securities 
of  doubtful  value  in  most  uneconomical  ways, 
that  they  have  been  able  to  get  along  at  all. 
Looked  at  broadly,  there  is  no  hope  that  our 
railway  system,  laboring  under  its  inherently 
weak  and  well-nigh  exhausted  financial  scheme, 
will  be  able  to  come  to  the  relief  of  the  country, 
by  providing  it  with  safe,  adequate  and  expeditious 
transportation  facilities.  On  the  contrary  what 
may  be  legitimately  expected  is,  that  it  will  each 
year  fall  a  little  more  behind  in  these  requirements, 
and  that  the  bankruptcies  of  the  past  will  repeat 
themselves. 

Two  things  must  change.  The  attitude  of  the 
railway  toward  the  people  must  change.  It  must 
be  made  worthy  of  the  confidence  of  the  people. 
In  order  to  accomplish  this,  the  financial  scheme 
of  the  railway  must  change — it  must  become 
honest. 

The  principal  railway  problem  in  the  United 
States  is  a  financial  problem.  That  being  settled, 
all  other  problems  will  settle  themselves,  or  be 
settled  easily  along  with  the  settlement  of  the 
principal    problem.     The    old    financial    railway 


Attempts  to  Correct  Wrongs      259 

system  of  issuing  bonds  to  build  roads,  and  of 
issuing  stocks  without  an  equivalent  of  value 
going  into  the  railway  treasury,  must  cease. 
The  old  system  of  borrowing  money  by  every 
conceivable  scheme,  and  the  foisting  on  the 
public  of  this  malodorous  polyglot  of  railway 
securities  must  cease.  And  this  old  system 
must  be  replaced  by  a  new  one,  the  fundamental 
conception  of  which  is,  that  there  shall  be  but 
one  uniform  security,  which  shall  have  the  right 
to  earn  a  fixed  dividend,  and  that  every  dollar 
of  value  that  this  security  purports  to  have,  shall 
be  represented  by  a  dollar  paid  into  the  treasury 
of  the  company.  Under  this  system  there  will 
be  no  difficulty  in  finding  all  the  money  required 
to  bring  our  transportation  system  up  to  a  civilized 
degree  of  safety,  with  adequacy  and  capacity 
of  growth  sufficient  for  the  needs  of  the  country. 
But  the  new  system  cannot  be  adopted  until  the 
old  system  is  blotted  out.  To  devise  a  plan 
whereby  the  old  system  may  be  blotted  out  and 
the  new  one  installed  without  injustice  to  any 
one,  is  a  first  class  undertaking. 

A  Man  I  Met — An  Interlude 

In  my  wanderings  I  met  a  man  possessed  of 
just  plain  common  sense.  He  was  something  of 
a  traveler,  and  I  found  him  well  acquainted  with 
the   geography   of   this   country.     He   knew   its 


260  An  American  Transportation  System 

coasts,  harbors,  lakes,  rivers,  mountains,  great 
cities,  its  innumerable  towns  and  villages.  He 
had  familiarized  himself  with  the  industries  of 
the  country,  its  agriculture  and  manufactures. 
He  was  so  much  better  acquainted  with  facts  of 
history  and  social  conditions,  past  and  present, 
over  the  world  than  I,  that  he  made  me  quite 
ashamed  of  my  ignorance.  But  he  was  most 
unfortunate  in  one  respect.  Apparently  he  had 
never  heard  of  the  Constitution  of  the  United 
States,  and  knew  nothing  of  the  political  division 
of  the  country  into  states.  I  am  quite  sure  that 
this  was  so,  not  because  he  had  never  known  these 
important  facts,  but  that  he  had  suffered  one 
of  those  wonderful  lapses  of  memory  such  as 
cause  a  man  to  forget  his  own  name  while  remem- 
bering perfectly  every  thing  else. 

I  regret  to  say  that  in  talking  with  my  new 
acquaintance,  I  had  very  little  opportunity  to 
gratify  my  desire  to  exploit  the  greatness  of  my 
native  land,  for  no  sooner  would  I  mention  some 
extraordinary  feature,  than  I  found  he  knew  more 
about  it  than  I  and  was  even  louder  in  his  praises. 
For  instance,  one  day  I  started  in  to  tell  him  about 
the  magnitude  of  our  railway  interests,  but  before  I 
got  fairly  launched  he  broke  in  on  me  with  excla- 
mations of  delight.  "  Wonderful!"  he  exclaimed, 
"  Marvelous !  You  have  more  railway  mileage  than 
all  Europe :  nearly  as  much  as  all  the  rest  of  the 
world.     And   yet  your  transportation  system  is 


Attempts  to  Correct  Wrongs      261 

only  in  its  youth.     It  is  n't  half  grown  yet." 
"I  think  we  have  done  pretty  well,"  I  said, 
being  a  little  hurt  by  the  talk  about  youth. 

"  Done  well?  Well,  I  should  say  you  have  done 
well — almost  too  well.  Yes,  it  would  have  been 
better  if  you  had  gone  a  little  slower.  But  it  is 
the  way  with  you  Americans.  You  never  put 
off  till  to-morrow  what  you  can  do  by  working 
all  night.  With  your  mighty  energy  you  feel 
that  you  can  hurl  a  bridge  across  a  great  river 
by  main  force.  You  go  around  curves,  through 
canons,  up  mountains,  in  a  way  to  make  one's 
head  swim.  Do  you  know,"  he  said,  suddenly 
breaking  off  in  a  way  he  had, "  that  you  Americans, 
with  all  your  boasting,  have  no  appreciation  of 
the  greatness  of  your  country  and  its  wonderful 
potential  ties."  He  said  that  last  word  with 
such  measurements  between  the  syllables  as  made 
it  sound  a  minute  long.  And  then  I  listened  to 
such  another  tale  of  grandeur  as  would  make 
me  blush  to  tell  it.  His  concluding  words  were, 
"When  your  transportation  system  is  complete 
you  will  be  the  masters  of  the  commerce  of  the 
world."  I  caught  my  breath  sharp  at  this,  for 
I  had  already  been  a  good  deal  moved  by  his 
laudation  of  my  country. 

Then  he  stood  with  folded  arms,  like  a  man 
on  a  high  mountain  scanning  the  whole  horizon. 
"Asia  on  one  ocean  and  all  the  rest  of  the  world 
on  the  other !    And  God,  what  productive  power ! " 


262  An  American  Transportation  System 

he  said.  "Look  at  it  reaching  from  ocean  to 
ocean:  all  the  products  of  the  earth  to  fill  the 
wants  of  man.  Only  distribution  to  the  world 
is  wanted.  And  see  your  transportation  system, 
how  it  is  welding  into  an  harmonious,  working 
entity !  But  a  few  years  ago  it  was  only  disjointed 
scraps.  Now  it  is  organizing.  Presently  it  will 
be  organized — river,  lake,  coast  and  railway, 
each  fulfilling  the  functions  it  serves  best;  all 
working  together  to  a  common  end.  When  your 
home  organization  is  complete  it  will  be  extended 
to  the  sea.  Then  you  will  be  masters  of  the 
commerce  of  the  world,  holding  both  production 
and  distribution  at  your  command." 

This  was  none  too  easy  for  me  to  digest.  After 
waiting  a  reasonable  time,  I  asked  him  if  he  would 
tell  me  what  he  meant  by  a  "distribution  entity" 
or  whatever  he  called  it.  He  said:  "What  I  am 
trying  to  impress  upon  you  is,  that  all  the  trans- 
portation facilities  of  a  country  ought  to  work  in 
harmony;  there  ought  to  be  no  conflict  between 
them.  If  your  products  can  be  more  economically 
carried  by  water  than  by  rail,  it  is  silly  to  carry 
them  by  rail  at  a  loss  in  order  to  kill  water  carriage. 
Both  must,  therefore,  be  under  a  common  control, 
in  order  that  each  may  do  that  which  it  can  best 
do,  and  the  country  be  best  served." 

"  Do  you  mean  to  say  that  you  would  unite  the 
transportation  facilities  of  the  country — land  and 
water — under  one  control?" 


Attempts  to  Correct  Wrongs      263 

"  Undoubtedly.  Why  not?  Can  they  serve  the 
country  better  by  mutually  destroying  each  other? 
Must  the  hands  quarrel  with  the  feet  because  they 
serve  best  for  walking?" 

"And  you  would  combine  all  the  railroads  in 
the  United  States  into  one  corporation?" 

"Of  course.  You  will  never  get  the  best  results 
out  of  your  system  until  you  are  able  to  treat  it, 
and  have  it  work  as,  a  whole." 

"Why,  you  would  have  a  corporation  greater 
than  any  in  the  whole  world.  It  could  subvert 
the  government,"  I  said. 

" My  dear  sir,"  he  said,  "do  you  not  know  that 
that  is  exactly  what  you  are  coming  to?  You 
are  going  soon  to  have  a  corporation  so  much 
larger  than  any  now  in  the  world,  that  it  will 
compare  to  others  as  one  of  your  sky  scrapers 
does  to  a  hovel.  As  for  it  subverting  the  govern- 
ment, that  is  as  you  like  it.  If  you  let  it  do  so, 
it  will.     If  you  care  to  prevent  it,  you  can." 

"How?"  I  demanded;  for  the  idea  of  a  cor- 
poration controlling  the  government  was  hideous. 
He  was  now  so  very  calm  that  I  thought  he  was 
scarcely  interested,  being  wholly  taken  up  with 
the  contemplation  of  the  magnitude  of  the  en- 
terprise. But  I  soon  found  that  he  was  more 
interested  in  this  phase  of  the  subject  than  the 
other. 

"The  capacity  of  a  corporation  to  work  ill  does 
not   depend  upon  its  size.     The  capacity  of  a 


264  An  American  Transportation  System 

corporation  to  juggle  with  its  finances,  to  over- 
capitalize, to  issue  fictitious  stock,  and  the  like, 
and  to  demand  monopolistic  prices  for  what  it 
does  when  it  has  every  thing  its  own  way,  deter- 
mines its  power  for  working  ill.  Control  the 
finances  of  a  corporation  and  you  draw  its  fangs. 
If  it  insists  on  being  a  hog,  treat  it  as  such.  If  it 
has  what  you  have  to  have,  and  by  reason  of 
your  necessities  charges  you  more  than  it  is  worth, 
take  the  matter  into  your  own  hands.  Let  the 
state  take  its  profits  till  they  are  fair.  There  is 
absolutely  no  other  way  to  treat  a  commercial 
hog/' 

"Yes,"  I  said,  rather  disappointed  that  he  had 
not  something  more  novel  to  offer,  "it  is  easy 
enough  to  speak  of  controlling  the  finances  of  a 
corporation,  but  rather  hard  to  do.  For  instance, 
you  know  there  is  a  great  question  to-day  about 
the  over-capitalization  of  our  railroads  and — — 

"Oh,  yes";  he  broke  in,  "I  know  all  about  that 
for  the  best  of  reasons.  That  question  must  be 
settled  sooner  or  later  and  the  longer  you  put  it 
off  the  more  difficult  it  will  be  to  take  it  up  and 
get  it  settled.     So  it  ought  to  be  settled  at  once. " 

"Yes,  but  how?"  I  asked. 

"Like  any  other  question,"  he  said,  quite  as 
calmly  as  though  he  were  talking  about  any 
ordinary  affair.  "Leave  it  to  an  impartial  court. 
If  it  is  found  that  some  of  the  stock  is  illegal,  shear 
it  off  from  the  liabilities  of  the  companies  like  any 


Attempts  to  Correct  Wrongs      265 

other  unlawful  issue.  The  trouble  about  people 
is  that  they  are  always  stunned  by  what  is  im- 
mense. They  cannot  apply  the  same  principles 
to  a  great  as  to  a  small  thing.  What  is  illegal 
is  illegal  no  matter  whether  it  involves  dollars  or 
millions.  Then  call  in  all  these  multifarious 
bonds,  debentures,  stocks  and  securities,  and  issue 
in  their  place  a  simple  uniform  kind  of  security 
on  a  basis  of  5%  dividends.  Give  the  court 
authority  to  make  rates  of  freight  and  fares  just 
enough  to  raise  money  for  the  necessary  expenses 
and  to  pay  dividends,  and  as  you  want  to  build 
new  roads  or  improve  old  ones,  issue  more  stock 
just  like  the  other,  drawing  5%.  You  needn't 
have  any  fear  of  the  public  refusing  to  buy  it, 
for  it  will  be  as  good  as  United  States  bonds." 

"Why,  that  would  be  government  ownership," 
I  said. 

"Government  ownership!  Not  by  any  manner 
of  means.  I  don't  go  a  thing  on  government 
ownership.  It  would  be  government  control. 
The  government  would  not  own  a  share  of  the 
stock,  nor  be  liable  for  a  dollar  of  the  liabilities 
of  the  company.  The  stock  would  be  owned  by 
the  public,  just  as  it  is  now. " 

"But  it  would  surely  concentrate  great  power 
in  the  hands  of  the  government?" 

"Quite  to  the  contrary.  It  would  deprive 
your  president  and  congress  of  about  two-thirds 
of  their  capacity  for  interference  in  private  affairs. 


266  An  American  Transportation  System 

They  would  have  nothing  to  do  but  constitute 
the  court.  After  the  court  settled  the  question 
of  how  much  the  system  is  worth,  and  created 
the  new  corporation  and  issued  the  new  stock, 
about  all  it  would  have  to  do  would  be  to  fix  the 
rates,  say  once  a  year,  by  a  degree;  and,  if  any 
new  road  was  to  be  built,  see  that  the  bids  for 
construction  were  all  right.  Everything  about 
the  actual  operation  of  the  road  would  be  left 
to  its  board  of  directors,  elected  by  its  stockholders. 
You  see  there  would  be  no  chance  for  rebates,  or 
discriminations  of  any  kind,  because  everybody 
would  have  to  come  to  the  company,  and,  of 
course,  all  rates  would  be  on  equal  terms  for  the 
same  distances  under  a  proper  classification  of 
commodities  according  to  their  values. " 

"Well,"  I  said,  "you  certainly  have  disposed 
of  the  whole  question  pretty  effectually.  But 
you  have  overlooked  one  thing.  Your  trans- 
portation system  could  not  exist  under  the  federal 
constitution." 

"The  federal  constitution?"  he  said  in  a 
dreamy  sort  of  way  as  though  he  was  racking 
his  memory  for  something.  ' '  What  is  the  federal 
constitution?" 

"It  is  a  wise  body  of  laws  framed  by  the  fathers 
of  our  country  to  form  a  more  perfect  union, 
establish  justice,  insure  domestic  tranquillity, 
provide  for  the  common  defense,  promote  the  gen- 
eral welfare  and  secure  the  blessings  of  liberty? " 


Attempts  to  Correct  Wrongs      267 

"It  certainly  had  most  excellent  purposes  in 
view.  When  did  the  fathers  frame  it?"  he 
asked. 

"About  one  hundred  and  twenty-five  years 
ago. 

"Why,  goodness  me!"  he  said,  "that  was 
before  the  discovery  of  the  steam  engine.  There 
was  n't  a  railroad  or  steamboat  in  the  world  at 
that  time.  You  do  not  mean  to  tell  me  that  the 
fathers  were  wise  enough  to  legislate  on  a  subject 
about  which  they  had  never  even  dreamed?" 

"No,  not  exactly  that.  But  they  knew  well 
there  would  be  commerce  in  this  country,  and 
they  provided  that  the  general  government  should 
regulate  commerce  between  the  states  and  that 
the  states  should  regulate  commerce  within  their 
limits." 

"The  states?"    he  asked,  "what  are  they?" 

"There  are  imaginary  lines  running  through 
the  country  dividing  it  up  into  states." 

"And  do  you  mean  to  tell  me  that  if  a  railroad 
train  starts  just  on  one  side  of  one  of  these  imagi- 
nary lines  and  goes  over  it  just  an  inch,  it  is 
commerce  under  the  control  of  the  general"  govern- 
ment, and  if  it  starts  just  inside  of  the  line  and 
goes  a  few  feet,  it  is  commerce  under  the  control 
of  the  states?" 

"That  is  about  it,"  I  replied,  a  little  nettled 
at  the  way  he  put  the  question. 

"And  you  have  never  changed  that?" 


268  An  American  Transportation  System 

"No,"  I  answered. 

He  burst  into  loud  peals  of  laughter.  I  can 
hear  him  yet.  He  kept  laughing  so  long  that  I 
got  indignant.  Finally,  seeing  that  I  was  much 
hurt  at  his  levity,  he  said  half  apologetically: 
"What  was  it  you  say  they  made  the  constitution 
for?  'To  form  a  more  perfect  union,  establish 
justice,  insure  domestic  tranquillity,  promote 
the  general  welfare' — and  they  left  the  railroads 
in  this  disjointed,  disorganized — but,  of  course, 
they  never  thought  of  such  a  transportation 
system  as  you  have.  How  the  old  fellows  must 
be  laughing  at  you!  And  I  have  always  under- 
stood that  you  Americans  were  the  most  intelli- 
gent, adaptable  and  practical  people. " 

He  vanished  leaving  me  a  little  crestfallen  and 
wondering  whether  there  was  any  basis  for  his 
mirth.  Suddenly  he  reappeared  as  quickly  as 
he  left. 

"By  the  way, "  he  said,  "did  the  fathers  provide 
for  a  postal  system?" 

"Yes,"  I  answered. 

"And  did  they  provide  that  the  general  govern- 
ment should  carry  the  mail  between  the  states 
and  that  the  states  should  carry  it  within  their 
boundaries?" 

I  explained  it  to  him. 

"Well,"  he  said,  "I  guess  the  old  gentlemen 
knew  what  they  were  about ;  but  they  were  natu- 
rally a  little  hazy  on  the  railroad  question.     Have 


Attempts  to  Correct  Wrongs      269 

you  got  a  copy  of  this  constitution  handy?" 
I  gave  him  one  and  watched  him  while  he 
carefully  read  it  through.  When  he  had  finished, 
his  old  enthusiasm  for  everything  American  re- 
turned. 

1 '  Wonderful !     Wonderful ! "  he  exclaimed.     ' '  It 
is  the  wisest  document  ever  framed  for  the  govern- 
ment of  human  kind.     See  how  it  restricted  the 
central  power!    There  is  no  chance  for  a  Csesar 
here.     See  how  the  states  were  left  as  independent 
communities    to  develop   without  any  imperial 
whip  over  their  domestic  affairs.     And  yet  how 
plain  it  is  that  everything  pertaining  to  the  general 
welfare  was  yielded  to  the  national  government. 
Do  you  think  it  possible  if  they  could  have  fore- 
seen the  tremendous  development  of  your  railway 
system  that  they  should  have  provided  for  national 
control  of  post-roads  and  left  the  transportation 
system   in   this   chaotic   condition?     Is   there   a 
shadow  of  doubt  that  under  the  authority  of  the 
federal  government  to  make  post-roads  it  could 
have  built  a  great  system  of  highways  throughout 
the  whole  country  and  that  every  foot  of  it  in 
every  state  would  have  been  subject  to  federal 
control?     My  good  friend,  if  the  wise  old  fathers 
were  here  to-day  instead  of  their  foolish  sons, 
they  would  add  just  a  few  words  to  that  celebrated 
constitution.     That   sentence   would   read,    "To 
regulate  commerce  among  the  several  states  and 
transportation  throughout  the  United  States. " 


PART  III 

A  SUGGESTED  CONSTITUTIONAL  AMEND- 
MENT 

Various  aspects  of  the  constitution  of  the  United 
States 

When  the  people  of  the  United  States  had 
ordained  and  established  their  constitution,  the 
government  thus  formed  presented  various  aspects. 
To  all  the  rest  of  the  world  it  was  a  nation,  with 
which  alone  all  foreign  powers  could  deal.  In 
this  national  aspect  it  was  endowed  with  all  the 
authority  of  any  sovereignty.  It  alone  could 
enter  into  treaties,  the  states  being  expressly 
prohibited  from  doing  so.  It  alone  had  power 
to  raise  and  support  armies,  to  provide  and  main- 
tain navies,  to  declare  war  and  conclude  peace. 
It  alone  had  power  to  regulate  commerce  with 
foreign  nations,  to  impose  duties  on  imports,  to 
define  and  punish  piracies  and  felonies  committed 
on  the  high  seas  and  offenses  against  the  laws 
of  nations;  to  admit  emigrants  and  to  provide 
for  their  naturalization.     Thus  whether  in  peace 

or  in  war,  as  to  all  the  rest  of  the  world,  the  people 

270 


Constitutional  Amendment  Sought   271 

were  a  nation.  In  this  external  aspect  of  the 
government  there  were  no  states.  It  was  pre- 
cisely as  though  there  had  never  been  any  states. 

In  another  aspect  the  people  were  a  nation 
though  this  aspect  had  nothing  to  do  with  the 
affairs  external  to  the  country  but  solely  with  its 
domestic  affairs.  The  nation  reserved  the  power 
to  coin  money,  to  fix  the  standard  of  weights  and 
measures,  to  grant  copyrights  and  patents,  to 
make  a  national  bankruptcy  law,  and  to  establish 
post-offices  and  post-roads.  In  these  aspects 
the  people  were  as  completely  national  as  though 
no  state  lines  had  ever  existed. 

There  was  another  aspect  of  nationality,  in 
which  the  people  as  a  nation,  was  an  undisputed 
sovereign,  yet  in  which  the  nation  recognized 
the  existence  of  other  sovereignties  within  its 
boundaries.  The  nation  had  sole  power  to  govern 
all  territory  belonging  to  it,  to  admit  new  states 
and  to  regulate  commerce  among  the  several  states. 

Thus  we  see,  that  in  their  external  relations  the 
people  were  a  nation  knowing  nothing  of  states ;  in 
certain  of  their  internal  relations  they  were  a  na- 
tion knowing  no  states ;  and  in  certain  other  inter- 
nal relations,  while  yet  a  nation  with  absolute  and 
sole  power,  there  was  a  recognition  of  other  govern- 
ments. To  carry  out  these  aspects  of  nationality, 
the  nation  was  given  full  power  to  make  all  need- 
ful laws.  To  provide  itself  a  revenue  it  had  the 
power  to  borrow  money  and  to  tax  its  citizens 


272  An  American  Transportation  System 

To  confirm  and  make  more  indisputable  these 
aspects  of  nationality,  the  people  prohibited  the 
states  from  entering  into  any  treaty,  alliance 
or  confederation;  from  making  any  agreement, 
or  compact  among  themselves,  or  with  any  foreign 
power;  from  engaging  in  war,  unless  actually 
invaded,  or  in  such  imminent  danger  as  not  to 
admit  of  delay;  from  coining  money,  emitting 
bills  of  credit,  or  making  anything  but  gold  and 
silver  coin  a  tender  in  payment  of  debts;  from 
laying  any  imposts  or  duties  on  imports,  or  ex- 
ports, or  of  tonnage;  or  from  keeping  troops  or 
ships  of  war  in  time  of  peace. 

There  was  another  most  remarkable  aspect  of 
nationality  presented  by.  the  people  in  prohibiting 
the  nation  from  doing  certain  things.  The  nation 
could  not  take  from  the  people  those  rights  and 
liberties  obtained  by  the  struggle  of  centuries — 
freedom  of  religion,  of  speech,  of  the  press,  of 
peaceable  assembly,  of  petition,  of  the  right  to 
bear  arms,  of  security  in  their  persons,  houses, 
and  papers,  of  trial  by  jury.  Even  the  nation 
could  not  deprive  any  one  of  life,  liberty  or  prop- 
erty without  due  process  of  law,  nor  could 
private  property  be  taken  for  public  use  without 
just  compensation.  Finally,  and  of  great  impor- 
tance, the  nation  could  not  lay  any  tax  or  duty 
on  articles  exported  from  any  state.  These  were  in 
the  nature  of  limitations,  which  the  nation  imposed 
upon  the  exercise  of  sovereign  power  by  itself. 


Constitutional  Amendment  Sought    273 

Next  we  may  observe  the  aspect  which  the 
nation  bore  to  all  the  states,  as  states.  It  guar- 
anteed to  every  state  a  republican  form  of  gov- 
ernment, and  to  protect  each  of  them  against 
invasion  or  domestic  violence.  The  nation  pro- 
vided that  its  taxing  power  should  be  uniform: 
"All  duties,  imposts  and  excises  shall  be  uniform 
throughout  the  United  States":  "direct  taxes 
shall  be  apportioned  among  the  several  states 
.  .  .  according  to  their  respective  numbers" 
(of  inhabitants).  "No  capitation  or  other  direct 
tax  shall  be  laid,  unless  in  proportion  to  the 
census,"  etc.  Likewise,  it  was  provided  that  no 
preference  should  be  given  to  the  ports  of  one 
state  over  those  of  another.  Thus  the  nation 
stood  as  the  equal  guardian  of  all  its  children, 
agreeing  to  impose  burdens  uniformly. 

The  original  framers  of  the  constitution  thought 
that,  except  where  acts  might  trench  upon  the 
authority  of  the  nation  as  a  nation,  the  states 
could  be  fully  trusted  to  make  their  own  laws. 
It  stood  in  a  distinct  attitude  of  prohibition  to 
the  states,  only  (in  addition  to  the  respects  above 
mentioned)  in  denying  them  the  power  to  pass  any 
laws  which  should  work  corruption  of  blood,  or 
which  should  make  an  act  a  crime  which  was 
not  a  crime  before  the  law  was  passed,  or  which 
impaired  the  obligation  of  contracts,  or  which 
granted  any  title  of  nobility. 

The  constitution  presented  still  another  aspect : 
18 


274  An  American  Transportation  System 

— the  relation  of  the  states  to  one  another.  Each 
was  to  have  full  faith  and  credit  in  the  public 
acts,  records  and  judicial  proceedings  of  every 
other  state ;  fugitives  from  justice  should  be  given 
up;  the  citizens  of  each  state  should  be  entitled 
to  all  privileges  and  immunities  of  citizens  in  the 
several  states;  controversies  between  two  or 
more  states  or  between  the  citizens  of  different 
states  should  be  decided  by  the  national  tribunal ; 
vessels  bound  to  or  from  one  state  should  not  be 
obliged  to  enter,  clear  or  pay  duties  to  another. 

Such,  in  brief,  are  the  aspects  which  the  people 
as  a  nation  present  to  the  outside  world,  which 
the  nation  presents  to  its  states  and  the  states 
to  one  another.  Every  governmental  power  not 
given  to  the  nation  or  prohibited  to  the  states 
was  reserved  to  the  states  or  to  the  people. 

It  will  be  surprising  to  many,  who  may  not  in 
these  recent  years  have  thought  on  the  subject, 
to  know  how  completely  and  entirely  the  nation 
trusted  the  states.  It  practically  left  them 
sovereign  in  everything,  except  that  they  could 
have  no  foreign  relations,  nor  could  they  do  any- 
thing which  interfered  with  absolute  free  trade 
among  thetnselves.  The  nation  imposed  much 
more  stringent  prohibitions  on  itself  against  the 
exercise  of  possible  arbitrary  power,  than  it 
imposed  on  the  states.  All  those  prohibitions 
against  interference  with  freedom  of  religion, 
of  speech,  the  press,  etc.,  were  prohibitions  on 


Constitutional  Amendment  Sought    275 

the  nation's  powers  of  legislation.  The  states 
were  left  free  to  legislate  on  such  subjects  as  they 
might  think  best.  The  field  of  the  national 
government  was  thus  originally  quite  narrow, 
though  very  important;  that  of  the  states  very 
wide  and  also  very  important.  Secured  in  their 
domestic  peace  and  against  foreign  attack  by  the 
mighty  arm  of  the  nation,  the  people  of  the 
states  were  left  free  to  develop,  as  independent 
and  liberty-loving  communities  might,  all  their 
domestic  relations,  their  family  relations,  their 
educational  ideas,  their  business,  corporations, 
highways — all  that  concerns  the  growth  and  de- 
velopment of  communities  under  the  blessings 
of  peace  and  liberty  were  left  to  them.  The  nation 
did  not  doubt  either  the  capacity  or  justice  of  the 
states  in  dealing  with  all  their  domestic  affairs. 

For  ninety  years  this  constitution  served. 
It  was  satisfactory  to  all  the  people  in  all  respects, 
except  one.  At  the  time  of  the  establishment 
of  the  constitution  slavery  existed  in  all  the 
states  but  one.  It  being  a  purely  domestic 
institution,  the  nation  had  nothing  to  do  with  it. 
It  was  left  to  the  states  to  deal  with  as  they 
severally  might  think  best.  But  from  the  very 
beginning  there  was  one  party  or  class  of  the  people 
which  sought  to  make  slavery  a  national  question, 
and  another  party  which  sought  to  maintain  it  as 
a  purely  state  question.1     This  was  practically 

1  Perhaps   this  statement   lacks  exactness.     On   the   one 


276  An  American  Transportation  System 

the  only  discord  which  ever  existed  amcmg  the  Ameri- 
can people;  but  it  branched  in  sundry  directions. 
It  divided  the  people  into  two  parties  of  extremists, 
one  exalting  beyond  its  due  bounds  the  idea  of 
nationality,  and  the  other  carrying  the  doctrine 
of  state  sovereignty  to  the  right  of  a  state  to 
secede  from  the  nation.  The  question  was  settled 
by  the  heroic  struggle.  With  its  settlement 
naturally  the  exalted  idea  of  nationality  bore 
fruits.  It  is  only  with  those  fruits  we  are  now 
concerned. 

The    constitutional   equilibrium   destroyed    by   the 
1 '  Fourteenth  Amendment ' ' 

The  Fourteenth  Amendment  to  the  constitution 
completely  disorganized  it,  so  far  as  the  relations 
between  the  nation  and  the  states  were  concerned. 
The  constitution,  as  adopted  originally,  expressed 
the  most  complete  trust  in  the  capacity,  wisdom 
and  justice  which  the  people  of  the  several  states 
might  show  in  legislation  concerning  their  domes- 
tic affairs.  The  Fourteenth  Amendment  substi- 
tuted for  this  trust,  an  entire  distrust  in  the 
capacity,  wisdom  or  justice  which  the  people  of 

hand,  it  was  never  contended  by  the  slave-holding  portion 
of  the  country,  that  it  was  beyond  the  power  of  a  state  to 
prohibit  slavery  within  it ;  but,  on  the  other  hand,  it  was  con- 
tended that  slaves  escaping  into  a  free  state,  or  temporarily 
accompanying  their  master  into  a  free  state,  were  not,  by 
such  acts,  freed.  Likewise,  that  congress  should  not,  and, 
perhaps,  could  not,  prohibit  slavery  in  the  public  territory. 


Constitutional  Amendment  Sought    277 

the  states  might  be  expected  to  show  in  their 
domestic  legislation.  Primarily  intended  as  a 
protection  to  the  recently  liberated  negroes,  the 
Fourteenth  Amendment  was  so  broad  as  practi- 
cally to  make  subject  to  review  any  legislative 
act  and  judicial  decision  of  state  authorities. 
I  do  not  say  that  the  Fourteenth  Amendment 
required  the  states  to  surrender  any  power  which 
a  free  government  should  ever  employ.  Its  impor- 
tant provisions,  that  no  "state  should  deprive 
any  person  of  life,  liberty  or  property  without 
due  process  of  law,  nor  deny  to  any  person  within 
its  jurisdiction  the  equal  protection  of  the  laws," 
were  fundamental  principles  of  American  life, 
policy  and  state  constitutional  law.  Except 
as  they  were  affected  by  the  existence  of  slavery, 
I  have  no  doubt  that  at  the  time  of  the  adoption 
of  this  amendment,  just  such  provisions  were  to  be 
found  in  the  constitution  of  every  state.  The 
amendment  could  have  served  all  useful  purposes 
by  confining  its  operation  to  the  liberated  slaves. 
Primarily  intended  as  a  stroke  at  the  Southern 
States,  the  blow  destroyed  state  government 
throughout  the  nation.  It  practically  declared 
that  the  states  were  incapable  of  administering 
justice  to  their  people  in  their  domestic  affairs — 
that  neither  their  legislatures  nor  their  courts 
could  be  trusted.  It  was  the  deadliest  blow  ever 
aimed  at  the  capacity  of  the  people  to  govern 
themselves. 


278  An  American  Transportation  System 

By  what  legerdemain  of  reason  or  white  heat 
of  passion,  the  people  could  have  been  led  to 
believe  that  there  was  more  virtue,  probity,  wis- 
dom and  justice  in  a  federal  judge,  than  in  the 
whole  people  of  a  state  and  in  their  state  tribu- 
nals, is  beyond  comprehension.  For  note  it  well, 
this  amendment  not  only  denied  to  the  people 
of  the  states  the  power  to  conclusively  legislate, 
concerning  their  domestic  affairs,  but  it  changed 
the  government  of  the  country  from  governments 
by  the  people  to  governments  by  the  federal 
courts.  Every  person  and  corporation,  under 
pretense  that  state  laws  and  regulations  deprive 
them  of  property  without  due  process  of  law, 
rushed  to  the  federal  courts.  Even  though  these 
corporations  owe  their  very  existence  to  the  state 
law, — their  very  right  to  do  business  at  all, — 
they  snap  their  fingers  at  state  control  and  at 
state  tribunals,  and  seek  the  hovering  wing  of  a 
federal  judge.  Especially  is  this  true  of  all 
corporations  operating  public  utilities.  Gas  com- 
panies, electric  companies,  elevator  companies, 
street  railway  companies,  steam  railway  com- 
panies, organized  and  existing  under  the  laws 
of  a  state,  collecting  the  very  tolls  by  which  they 
live  from  the  people  of  the  state,  are  yet  not  sub- 
ject to  the  control  of  the  state,  nor  of  its  courts, 
if  that  control  meets  not  the  approval  of  a  federal 
judge.  If  rates  fixed  by  the  highest  state  au- 
thorities are  not  such  as    in    the    opinion    of    a 


Constitutional  Amendment  Sought    279 

federal  judge  are  just  and  reasonable,  they  are 
set  aside. 

The  Fourteenth  Amendment  a  mere  negation 

But  that  is  not  all.  The  Fourteenth  Amend- 
ment is  a  mere  negation.  It  simply  gives  the 
court  the  power  to  say,  Thou  shalt  not.  It  con- 
fers upon  no  legislative  body  and  no  court  the 
power  to  say  what  shall  be.  It  merely  suspends 
the  power  of  the  state.  It  takes  the  power  from 
the  state,  but  does  not  confer  it  upon  the  nation. 
Had  the  people  in  their  collective  wisdom  seen 
fit  to  extend  the  legislative  authority  of  the  nation 
to  other  fields  than  those  originally  conferred 
upon  it,  the  amendment  would  not  have  been 
so  bad.  If,  for  instance,  in  addition  to  giving 
congress  the  power  to  pass  laws  of  bankruptcy 
which  it  originally  possessed,  it  had  extended  its 
power  to  the  fixing  of  the  rates  to  be  charged  by 
public  utility  corporations,  we  would  at  least 
have  known  where  to  look  for  legislative  action. 
But  the  amendment  did  not  extend  the  powers 
of  congress  in  the  respects  in  which  the  federal 
courts  have  intervened.  The  courts  themselves 
have  decided  that  it  is  not  their  province  to 
enter  upon  the  administrative  task  of  framing 
a  tariff  of  rates :  their  jurisdiction  begins  and  ends 
with  the  declaration  of  the  individual  judge, 
that  the  particular  schedule  is  or  is  not  reasonable. 


280  An  American  Transportation  System 

The  net  result  is  that  we  have  a  huge  legislative 
vacuum.  The  Fourteenth  Amendment  takes  the 
power  from  the  states,  but  does  not  confer  it  upon 
the  nation. 

The  weak  spot  in  our  scheme  of  government 

It  was  the  claim  of  the  makers  of  our  national 
constitution,  that  in  the  totality  of  our  govern- 
ment there  could  be  no  such  thing  as  a  govern- 
mental hiatus.  All  governmental  authority  not 
vested  in  the  nation,  was  reserved  to  the  states 
or  to  the  people.  Surely  this  filled  the  entire  scope 
and  range  of  sovereignty.  Moreover  it  was 
claimed  that  the  respective  powers  of  the  na- 
tional and  state  governments  were  so  clearly 
defined,  that  there  could  never  be  any  interfer- 
ence between  them.  Within  its  own  sphere  the 
national  authority  was  supreme.  Within  its  own 
sphere  the  state  authority  was  supreme.  In  the- 
ory the  scheme  was  perfect.  But  has  it  been  so 
perfect  in  its  practical  operation? 

I  suppose  I  was  born  with  a  lack  of  reverence 
for  things  which  most  people  idolize  most  largely, 
because  they  were  raised  under  them  and  because 
these  things  have  existed  for  a  long  time.  At  any 
rate,  I  must  confess  that  my  admiration  for  our  na- 
tional constitution  is  tempered  by  certain  facts.  I 
am  compelled  to  confess  a  lack  of  admiration  for 
a  document  so  loosely  drawn,  that  its  most  import- 


Constitutional  Amendment  Sought    281 

ant  principle  admitted  of  diametrically  opposite 
interpretations  by  millions  of  equally  learned 
and  honest  people — people  whose  earnestness 
of  interpretation  was  attested  by  their  life's 
blood.  Nor  is  my  admiration  heightened  by 
the  fact,  that,  after  one  hundred  and  twenty 
odd  years  of  judicial  interpretations,  the  mystery 
of  much  of  the  constitution  is  as  yet  unsolved. 
But  it  is  not  merely  in  the  matter  of  the  inter- 
pretation of  the  constitution  that  my  admiration 
is  lacking.  In  some  of  its  essential  features  there 
is  just  cause  for  complaint.  There  is  no  other 
power  on  earth  to-day  that  may  not  make  a 
binding  treaty  with  other  powers.  But  with  us, 
all  other  powers  must  take  notice  that  the  treaties 
we  make  may  be  unconstitutional  and  therefore 
void.  Nor  is  this  all.  Our  national  government 
may  make  treaties  which  a  state  may  nullify. 
Because  if  the  treaties  intrench  upon  the  reserved 
authority  of  the  states,  they  are  to  that  extent 
unconstitutional.  As  witness  the  treaty  with 
Japan,  which  the  state  of  California  has  the 
undoubted  right  to  nullify,  because  all  questions 
relative  to  education  and  land  ownership  are 
state  and  not  federal  questions,  Truly,  all  this 
may  be  answered  by  simply  saying  that  our  treaty 
makers  must  make  constitutional  treaties.  But 
in  the  meantime  it  is  very  embarrassing  to  acknow- 
ledge that  our  nation  has  entered  into  an  inter- 
national contract  which  it  cannot  fulfill. 


282  An  American  Transportation  System 
Conflict  of  laws  under  our  governmental  scheme 

Just  as  slavery  was  the  only  cause  of  dispute 
between  the  American  people,  so  the  constitutional 
relationships  between  the  federal  government  and 
the  states  and  between  the  states,  raise  the  only 
serious  question  in  the  governmental  affairs  of 
this  country.  Let  me  give  you  a  practical  illus- 
tration of  this  in  a  matter  which  has  just  this 
moment  fallen  under  my  eye. 

The  law  of  the  state  of  Massachusetts  is  that 
no  railroad  doing  business  in  that  state  can  in- 
crease its  bonded  or  stock  indebtedness  or  consoli- 
date with  any  other  roads,  without  the  approval 
of  the  railroad  commission  of  that  state.  Now, 
the  New  York,  New  Haven  and  Hartford  Railroad 
Company  is  a  rather  vigorous  railway  corporation, 
owning  and  controlling  a  railway  running  from 
the  wicked  city  of  New  York  to  the  holy  city  of 
Boston,  and  hence  in  the  course  of  its  meanderings 
traversing  the  states  of  New  York,  Connecticut, 
Rhode  Island,  and  a  part  of  Massachusetts. 
Incidentally  it  may  be  remarked,  that  this  rail- 
way company  threatened  to  give  to  New  England 
the  best  railroad  system  in  America  and  may  do 
so  yet,  notwithstanding  the  combined  opposition 
of  the  United  States  and  New  England.  The  cor- 
poration, as  at  present  constituted,  is  a  consoli- 
dation of  so  many  little  roads  that  one  would 
have  to  be  a  sort  of  railway  gazette  to  remember 


Constitutional  Amendment  Sought    283 

all  of  them.  Nor  do  I  know  to  which  of  the  vari- 
ous states  through  which  it  runs,  it  owes  prime 
allegiance. 

Now  the  particular  crimes  of  which  this  cor- 
poration has  been  guilty  are,  that  it  did  its  con- 
solidating and  increased  its  indebtedness  without 
the  approval  of  the  railway  commission  of  Mas- 
sachusetts, thus,  under  the  laws  of  that  state, 
having  made  itself  liable  to  forfeiture  of  its  rights 
to  do  business  in  Massachusetts.  Thereupon 
the  attorney-general  of  Massachusetts  reported 
these  facts  to  the  legislature  of  Massachusetts, 
and  asked  to  know  its  pleasure  respecting  the 
forfeiture.  Thereupon  the  president  of  the  rail- 
road makes  reply  to  the  attorney-general  as 
follows:  "The  New  Haven  road  has  always 
acted  under  its  Connecticut  charter;  nearly  all 
of  our  railroad  operations,  all  of  our  financial 
operations,  all  of  our  stock  issues,  bond  issues, 
etc.,  our  consolidations,  etc.,  have  been  made  under 
our  charter  with,  and  in  accordance  with,  the 
laws  of  the  state  of  Connecticut.  It  may  yet  be 
a  case  of  the  laws  of  Massachusetts  coming  in 
conflict  with  the  laws  of  the  state  of  our  birth." 
It  would  appear  from  this  reply,  that  the  New 
Haven  (as  the  railroad  is  called)  owes  its  origin 
to  the  state  of  Connecticut,  and  being  a  Connec- 
ticut corporation  it  may  do  whatever  the  laws 
of  that  state  permit  it  to  do.  But  the  laws  of 
Connecticut  may  allow  this  corporation  to  do  a 


284  An  American  Transportation  System 

great  many  things  which  the  laws  of  Massachusetts 
prohibit  it  doing.  Likewise  the  laws  of  Rhode 
Island  may  be  at  variance  with  both  those  of 
Massachusetts  and  Connecticut.  And  then,  there 
is  New  York  to  be  reckoned  with  also.  Now, 
to  which  of  these  states  must  the  New  Haven 
apply  for  permission  to  do  any  act?  Here  is  a 
corporation  owning  a  railway  extending  into  four 
jurisdictions.  Must  it  in  its  corporate  doings 
conform  to  the  conflicting  laws  of  each  state? 
Or  shall  we  say  that  the  state  of  Connecticut  can 
confer  upon  one  of  its  corporations  authority  to 
violate  the  laws  of  Massachusetts? 

We  have  here  an  illustration  of  a  weak  spot 
in  the  American  scheme  of  government.  In  the 
very  nature  of  its  calling  a  railway  cannot  pay 
much  more  respect  to  an  imaginary  state  line 
than  the  wind  does.  And  yet  it  is  of  very  great 
importance  to  a  state  in  which  a  railway  may 
have  its  physical  property,  to  be  able  to  control 
its  corporate  acts,  and  especially  the  amount  and 
character  of  its  indebtedness;  for  upon  these, 
rates  are  most  largely  based. 

The  conditions  above  set  forth  prevail  all  over 
the  United  States.  You  may  say  that  it  is  quite 
universally  true,  that  every  railway  corporation 
in  the  United  States  is  chartered  or  organized 
under  and  by  the  laws  of  some  particular  state. 
Yet  directly  or  indirectly,  all  our  great  railway 
corporations  own  railways  extending  into  other 


Constitutional  Amendment  Sought    285 

states  than  the  one  to  which  they  owe  their  origin. 
Blanket  mortgages  as  well  as  stock  issues  are 
constantly  being  made  by  these  corporations 
in  conformity  with  the  laws  of  the  state  of  their 
origin,  but  affecting  physical  properties  in  other 
states,  and  without  any  reference  to  the  laws  of 
these  other  states.  It  may  be  true  that  these 
corporations  have  obtained  the  permission  of 
the  states  into  which  they  have  extended  their 
lines.  And  it  is  also  probably  true,  that  the  laws 
of  most  states  permit  railways  chartered  by  other 
states  to  be  extended  into  their  territory.  But 
that  is  not  the  point.  The  point  is  that  there  may 
be  railway  corporations  existing  by  virtue  of  the 
laws  of  one  state,  owning  no  railway  in  that  state, 
yet  owning  railways  in  many  other  states  In 
such  a  case  the  state  wherein  the  physical  property 
of  the  railway  lies,  may  have  nothing  whatever 
to  say  concerning  the  corporate  acts  of  the  corpora- 
tion which  owns  the  road. 

These  corporate  acts  are  of  the  utmost  import- 
ance to  the  corporation.  The  laws  of  the  state 
under  which  a  corporation  is  organized,  determine, 
among  other  things,  the  purposes  for  which  the 
corporation  may  exist,  and  these  may  be  either 
very  limited  or  may  cover  every  conceivable 
kind  of  business;  the  period  for  which  it  may 
exist,  and  this  may  be  for  a  limited  number  of 
years  or  forever;  the  amount  of  the  capital  stock 
and  the  amount  which  must  be  paid  on  subscrip- 


286  An  American  Transportation  System 

tions  to  capital  stock,  and  this  may  be  nothing  or 
the  par  value;  the  assessibility  of  the  stock  and 
the  personal  liability  of  stockholders ;  the  number 
of  directors,  their  residences,  their  duties  and 
liabilities ;  the  right  of  the  corporation  to  contract 
debts,  issue  bonds;  and  generally  the  doing  of 
any  and  every  act  which  the  corporation  may 
do  as  a  corporation. 

Now,  note  the  far-reaching  consequences  of  the 
facts  just  recited.  The  amount  of  the  stock  and 
bond  debt  of  a  road  is  a  matter  of  vital  importance 
to  the  people  of  the  state  in  which  it  is  physically 
located,  because,  upon  the  amount  of  these 
depends  largely  the  rates  which  may  be  charged. 
The  liabilities  of  a  road  are  supposed  to  represent 
approximately  its  value,  and  since  it  is  entitled 
to  a  fair  return  upon  the  money  invested,  the 
state  freight  and  passenger  rates  cannot  ignore 
the  railway's  obligations.  Yet  it  may  well  be 
doubted  whether  any  state  except  the  one  to 
which  the  corporation  owes  its  existence,  has  the 
slightest  thing  to  say  upon  these  most  vital 
subjects. 

When  you  come  to  consider  that  form  of  railway 
corporation  known  as  a  holding  company,  you 
will  find  that  it  generally  has  selected  as  the  state 
of  its  origin  one  in  which  it  owns  no  railway  at  all, 
thus  completely  dissevering  its  physical  operations 
from  its  corporate  and  financial  operations.  Of 
this  kind  of  railway  corporation  the  Southern 


Constitutional  Amendment  Sought    287 

Pacific  Company  affords  a  typical  example.  It 
owes  its  origin  to  the  state  of  Kentucky.  It  owns 
not  a  foot  of  railway  in  that  state,  but  it  con- 
trols railways  in  Utah,  Nevada,  Oregon,  Cali- 
fornia, Texas,  the  territories  of  Arizona  and  New 
Mexico  and  perhaps  elsewhere.  Not  one  of  these 
governments  has  the  slightest  voice  in  making 
laws  which  shall  in  any  way  affect  this  corporation 
except  the  state  of  Kentucky. 

It  may  be  not  inappropriate  to  inquire  what 
interest  the  people  of  Kentucky  have  in  a  railway 
corporation  which  does  not  own  any  property 
or  do  any  business  in  that  state.  Their  interest 
is  exactly  confined  to  the  amount  of  revenue 
their  state  can  collect  from  the  corporation,  as 
a  consideration  for  allowing  it  a  franchise  to  do 
as  it  pleases.  And  as  the  amount  of  the  tax 
increases  with  the  size  of  the  capital  of  the  corpora- 
tion, the  more  exaggerated  that  is,  the  better  it 
suits  the  state  granting  the  charter.  Indeed, 
certain  states  have  actually  made  bids  for  cor- 
porations to  organize  under  their  laws,  by  making 
conditions  easy  for  corporations  so  organizing. 
It  is  rather  too  much  to  expect  that  the  legislature 
of  Kentucky  will  look  after  the  interests  of  the 
state  of  California.  So  far  as  I  am  able  to  ascer- 
tain, the  only  interest  which  Kentucky  has  shown 
in  the  Southern  Pacific  Co.  is  exhibited  in  a 
laudable  attempt  to  get  from  it  a  few  millions 
in  taxes. 


288  An  American  Transportation  System 

Here  then  is  a  condition  which  may  and  does 
exist  under  our  scheme  of  government,  whereby 
a  corporation  may  lawfully  exist  with  no  control 
over  its  corporate  acts  by  any  state  which  may 
be  affected  by  those  acts. 

"But,"  you  say,  "where  a  corporation,  such 
as  one  of  these  holding  companies,  controls  rail- 
ways operated  in  several  states,  it  is  engaged  in 
interstate  commerce  and  is  therefore  amenable 
to  the  laws  of  congress."  This  may  well  be 
doubted.  A  holding  company  pure  and  simple 
is  not  a  corporation  which  owns  railways;  it  is  a 
corporation  which  owns  the  stocks  and  securities 
of  railways.  By  virtue  of  its  ownership  of  voting 
stock,  it  is  enabled  to  control  the  corporations 
whose  stocks  it  owns.  But  except  in  the  fact 
that  it  is  a  corporation,  a  holding  company  does 
not  differ  from  any  individual  owning  the  same 
stocks.  It  may  therefore  be  doubted  whether 
a  holding  company  is  anything  more  or  less  than 
a  corporation  of  the  state  to  which  it  owes  its 
origin,  and  therefore  not  subject  to  federal  control. 

I  think  there  is  a  current  idea,  that  the  Northern 
Securities  Case  decided  contrary  to  the  views 
just  expressed.  It  is  true  that  the  Northern 
Securities  Co.  was  a  purely  holding  corporation 
organized  under  the  laws  of  New  Jersey  for  the 
purpose  of  owning  securities  of  railways  operated 
in  other  states,  and  it  was  held  subject  to  the 
anti-trust   laws   of  congress.     But  this   was   so 


Constitutional  Amendment  Sought    289 

held  not  because  it  owned  these  securities,  but 
because  it  was  a  corporation  expressly  organized 
for  the  purpose  of  acquiring  the  stocks  of  competi- 
tive roads  and  for  the  purpose  of  stifling  competi- 
tion between  them.  And,  moreover,  it  did  not 
purchase  these  stocks.  It  merely  exchanged  its 
own  stocks  for  the  stocks  of  the  railways. 

What  the  court  really  decided  by  a  bare  majority 
was,  that  this  corporation  was  organized  for 
unlawful  purposes — to  engage  in  business  pro- 
hibited by  the  laws  of  the  United  States.  The 
court  expressly  disclaimed  the  contention  that 
congress  could  control  a  state  corporation  in  its 
acquisition  of  the  stocks  of  railway  companies, 
even  though  these  companies  were  engaged  in 
interstate  transportation,  unless  the  effect  of  the 
ownership  was  to  restrain  competition. 

What  then  is  the  situation?  It  is  this:  the 
scheme  of  federal  and  state  government  under 
which  we  are  operating,  permits  the  existence  of 
a  corporation  under  the  laws  of  some  particular 
state  having  no  interest  in  the  control  of  the 
corporation,  which  corporation  may  control  the 
operation  of  the  physical  properties  of  railways 
situated  in  other  states,  and  neither  these  other 
states  nor  the  federal  government  have  the  slight- 
est control  over  it.  As  such,  the  corporation  is 
practically  without  any  governmental  control 
whatsoever.  There  is  no  inherent  objection  to 
the  before-mentioned  Kentucky  corporation  be- 
19 


290  An  American  Transportation  System 

coming  the  owner  of  the  stocks,  and  therefore  the 
controller  of  the  operations  of  all  non-competing 
railways  in  the  United  States. 

What  is  the  next  step?  Ordinarily  the  control 
of  a  corporation  is  changed  by  a  sale  or  transfer 
of  its  corporate  shares.  But  that  is  not  the  only 
wTay  that  this  may  be  accomplished.  The  stock- 
holders of  a  corporation  own  the  physical  property 
of  the  corporation,  and,  ordinarily,  they  may 
authorize  the  sale  of  such  physical  properties  the 
same  as  the  owner  of  a  house  may  sell  it.  Appar- 
ently the  only  limitation  on  a  railway  corporation 
selling  its  railway  is  that,  under  existing  laws, 
it  may  not  be  sold  to  a  competing  road.  The 
right  to  sell  is  the  right  to  enjoy  property.  It  is 
a  necessary  accompaniment  of  unlimited  and 
unrestricted  ownership.  It  is  no  less  valuable 
than  the  right  to  own  at  all.  It  is  a  right  which, 
in  its  essential  attributes,  neither  congress  nor 
any  state  legislature  can  limit,  without  overturning 
the  very  foundations  of  our  government  and  our 
civilization.  There  is,  therefore,  no  inherent 
impossibility  in  a  railway  corporation,  owing  its 
origin  to  the  state  in  wThich  its  physical  properties 
are  situated,  transferring  these  physical  properties 
to  a  non-resident  corporation,  the  resident  corpora- 
tion winding  up  its  affairs  and  ceasing  to  exist 
as  a  corporation.  Thus  the  state  completely 
loses  control  of  the  corporation  itself. 

"But,"  you  say,  "wherever  the  ultimate  of 


Constitutional  Amendment  Sought    291 

stock  may  be  lodged — whether  in  a  non-resident 
holding  corporation,  or  in  non-resident  private 
parties,  and  no  matter  whether  the  title  to  the 
railway  remain  in  the  resident  corporation  or  be 
transferred  to  a  foreign  corporation,  this  fact 
remains — to  wit:  that  the  physical  properties  of 
a  railway  must  always  be  in  some  state,  and  the 
state  in  which  they  are  situated  must  ever  retain 
over  them  the  essential  attributes  of  sovereignty; 
that  is,  the  power  of  taxation,  the  right  to  regu- 
late their  physical  movements,  and  the  right  to 
regulate  the  rates  which  they  may  charge  for 
their  services." 

But  you  are  wrong.  These  rights  of  the  states 
were  taken  from  them  by  the  Fourteenth  Amend- 
ment to  the  federal  constitution.  I  do  not,  of 
course,  mean  that  the  states  have  not  still  the 
right  to  legislate  on  these  subjects.  What  I  do 
mean  is,  that  the  validity  of  its  legislation  is  no 
longer  subject  to  the  decision  of  its  own  judicial 
tribunals.  Jurisdiction  in  that  respect  has  been 
transferred  to  the  federal  court.  With  that 
transference,  practically  the  last  shred  of  control 
of  the  states  over  their  own  corporate  creatures 
passed  away,  resulting  in  the  mere  negation 
hereinbefore  referred  to. 

It  would  thus  appear,  that  by  reason  of  the 
inherent  weak  spot  in  our  scheme  of  government 
co-operating  with  the  Fourteenth  Amendment, 
railways,  as  well  as  other  corporations,  are  enabled 


292  An  American  Transportation  System 

to  find  practical  immunity  from  governmental 
control  as  to  certain  matters  of  vital  importance 
to  the  states,  to  the  general  government  and  to 
the  people.  By  reason  of  the  lack  of  jurisdiction 
of  the  federal  government  over  the  corporate 
acts  of  corporations  of  purely  state  origin,  or  even 
over  such  corporations  as  own  and  hold  control, 
by  stock  ownership,  of  railway  corporations 
engaged  in  interstate  business,  and  by  reason 
of  the  lack  of  jurisdiction  of  the  states  in  which 
the  physical  properties  of  railways  are  situated, 
over  non-resident  corporations  owning  or  con- 
trolling them,  and  by  reason  of  the  lack  of  finality 
of  state  legislation  over  even  its  own  corpora- 
tions; there  practically  exists  an  hiatus  in  this 
country  in  the  governmental  control  of  railway 
corporations. 

The  main  trouble  is,  that  we  have  no  govern- 
mental agency  which  can  at  one  and  the  same 
time  be  brought  to  bear  upon  the  corporation 
as  a  corporation,  and  upon  the  physical  operations 
of  the  corporation.  The  civil  jurisdiction  in 
which  the  corporation  came  into  being,  cannot, 
if  it  would,  be  brought  to  bear  upon  the  physical 
operations  of  the  corporation,  and  the  civil  juris- 
diction in  which  the  physical  operations,  are 
carried  on,  cannot  be  brought  to  bear  upon  the 
corporate  acts  of  the  corporation.  From  the 
standpoint  of  the  corporation,  there  was  ample 
reason  why  the  Southern  Pacific  Co.  should  have 


Constitutional  Amendment  Sought    293 

chosen  Kentucky  as  its  birthplace,  and  why 
innumerable  corporations  having  no  business  in 
New  Jersey,  seek  the  twilight  region  of  that  state 
for  immunity  from  governmental  control  of  their 
corporate  acts. 

But  whether  or  not  I  am  right  in  the  conclusion 
that  there  is  a  legislative  vacuum  in  our  scheme 
of  dual  government;  I  think  no  one  who  has 
attentively  studied  the  matter  can  doubt,  that 
the  scheme  is  about  the  awkwardest  and  clumsiest 
that  could  have  been  devised.  And  this  is  shown 
not  only  in  the  inability  of  any  governmental 
authority  to  grasp  the  transportation  problem 
in  its  entirety,  but  it  is  equally  true  so  far  as  the 
organic  growth  and  development  of  our  trans- 
portation system  is  concerned.  It  is  to  this  latter 
aspect  of  the  problem  that  I  would  like  to  direct 
attention. 

In  no  aspect  is  commerce  so  obviously  national 
as  in  the  operation  of  the  facilities  by  means  of 
which  products  are  distributed.  A  transportation 
system  should  be  nothing  but  the  provider  of 
the  very  best  means  by  which  the  physical  move- 
ments of  commerce  can  be  effected.  Neither 
has  the  national  government,  nor  any  state  govern- 
ment, the  slightest  reason  to  make  it  anything 
else,  nor  to  throw  any  obstacle  in  the  way  of  the 
system's  attainment  of  that  end. 

It  is  said  that  eighty-five  per  cent,  of  our  internal 
trade  is  trade  between  the  states.     It  therefore 


294  An  American  Transportation  System 

follows  that  eighty-five  per  cent,  of  our  facilities 
of  transportation  are  devoted  to  interstate  trade. 
But  in  a  wider  sense,  all  our  transportation  facili- 
ties are  devoted  to  interstate  trade.  For  however 
distinctively  intrastate  a  railway  may  be,  it 
amounts  to  nothing,  unless  it  is  also  engaged 
in  carrying  freight  which  has  originated  outside  of 
the  state  or  is  bound  outward.  Thus,  at  one  time 
or  another,  every  and  all  transportation  facilities 
which  we  possess  are  engaged  in  interstate  traffic. 
Now  what  is  the  situation  ?  Not  only  have  we 
no  co-ordinated  transportation  system,  but  the 
unco-ordinated  parts  of  such  a  system  as  we  have, 
are  subject  to  no  common  government  control. 
On  the  contrary,  directly  or  indirectly,  every 
part  of  our  system  is  subject  to  the  control  of  one 
congress  and  forty-five  legislative  bodies.  It  is 
idle  to  look  at  it  otherwise;  for  every  state  regula- 
tion affects,  directly  or  indirectly,  every  railway 
in  the  United  States;  unless,  indeed,  there  be 
some  state  that  is  so  poor  that  it  has  no  commerce 
with  any  other  state — a  condition  which  happily 
will  not  be  found.  So  we  have  one  congress  by 
its  delegated  authority — the  commission,  trying 
to  fix  rates  on  the  eighty-five  per  cent,  of  inter- 
state traffic,  and  forty-five  states,  more  or  less, 
trying  to  fix  rates  on  the  fifteen  per  cent,  of 
intrastate  traffic,  and  by  their  conflicting  man- 
oeuvres, constantly  throwing  out  of  gear  the 
entire  transportation  of  the  country. 


Constitutional  Amendment  Sought    295 

And  this  is  true  to  a  greater  or  less  extent, 
concerning  the  financial  operations  of  the  railway 
corporations;  as  witness  the  illustration  before 
given  of  the  possible  action  of  Massachusetts, 
in  forfeiting  the  right  of  a  railway  to  business  in 
that  state  because  it  had  not  applied  to  it  for 
authority  to  increase  its  debt.  Can  any  more 
cumbersome  scheme  be  imagined,  or  one  less 
calculated  to  develop  the  facilities  by  which 
commerce  is  carried  on  between  the  people  of 
this  country? 

What  the  fathers  would  have  thought  of  it 

It  would  be  interesting  to  know  what  attitude 
the  framers  of  our  constitution  would  have  held 
toward  transportation,  if  it  had  existed  when  the 
constitution  was  made  as  it  does  now.  Knowing 
transportation  as  we  have  it  to-day,  it  requires 
a  lively  imagination  to  see  it  as  it  was  one  hundred 
and  twenty  odd  years  ago.  Knowing  transporta- 
tion as  it  was  then,  it  was  infinitely  more  impossible 
for  the  fathers  to  see  it  as  it  is  now,  than  it  is  for 
us  to  see  it  as  it  will  be  one  hundred  and  twenty 
years  in  the  future.  It  is  sufficient  to  say  that 
there  is  not  a  facility  of  transportation  as  we 
have  it  to-day,  of  which  they  had  the  slightest 
conception.  The  last  remnants  of  colonial  trans- 
portation are  the  utterly  unimportant  sail  boat 
occasionally    seen,    the   ox   cart    and    the    stage 


296  An  American  Transportation  System 

coach  of  the  sparsely  inhabited  regions.  Even 
the  prairie  "  schooner, "  or  freighter  of  the  present 
day  was  unknown. 

But  while  the  fathers  had  no  conception  of 
modern  transportation,  they  knew  that  there 
would  be  commerce  among  the  people  of  the 
different  states.  And  that  which  is  clearer  than 
anything  else  in  the  constitution  is  the  intention 
of  its  framers,  that  there  should  forever  exist 
absolutely  untrammeled  and  unrestricted  freedom 
of  trade  throughout  the  length  and  breadth  of 
the  United  States.  The  states  were  absolutely 
prohibited  from  imposing  any  barrier  to  commerce 
among  them.  Likewise,  the  nation  prohibited 
itself  from  imposing  any  barrier  to  such  commerce, 
or  to  the  making  of  any  regulation  which  should 
give  any  preference  to  one  port  over  another. 
The  sole  power  which  the  nation  retained  over 
commerce  between  the  states,  was  the  power  to 
regulate  it. 

Certain  authorities  have  considered  that  the 
power  to  regulate  commerce  is  the  power  to 
prohibit  it.  Such  an  interpretation  is  utterly 
repugnant  to  the  whole  spirit  of  the  constitution. 
So  far  from  the  power  to  regulate  being  the  power 
to  destroy,  it  is  rather  the  power  to  keep  com- 
merce free  from  obstruction — to  prescribe  the 
orderly  regulations  by  which  it  may  be  carried 
on.  At  any  rate,  the  dominant  idea  was  that 
the  states  should  never  do  anything  which  in  any 


Constitutional  Amendment  Sought    297 

way  restricted  commerce  among  them.  Whatever 
regulating  was  to  be  done  was  a  national  affair. 
So  much  for  this  conception  of  the  fathers. 

There  were  certain  other  matters  which  the 
framers  of  the  constitution  thought  should  be 
reserved  to  the  nation.  Among  these  were  the 
power  over  the  currency  of  the  country,  the  fixing 
of  the  standard  of  weights  and  measures,  the  enact- 
ment of  uniform  laws  on  the  subject  of  bankrupt- 
cies and  the  establishment  of  post-offices  and 
post-roads.  Upon  these  subjects  the  authority 
of  congress  is  supreme. 

What  is  it  that  at  once  strikes  one  as  the  pre- 
dominant characteristic  of  the  subjects  which 
the  constitution  makers  left  to  national  legisla- 
tion? Is  it  their  relative  importance?  By  no 
means.  No  one  would  for  a  moment  hold  that 
bankruptcy  is  a  matter  of  equal  importance  with 
marriage  and  divorce,  the  relations  between  parent 
and  child  or  inheritance  laws.  Yet  each  state 
was  allowed  to  legislate  upon  these  subjects 
without  federal  restraint.  Important  as  are 
laws  on  weights  and  measures,  they  are  not  to 
be  classed  with  laws  the  subject  of  which  is  the 
ownership  and  sale  of  lands  and  personal  pro- 
perty; yet  these  are  left  to  the  states  to  deal  with 
as  their  respective  policies  may  dictate.  Laws 
regulating  currency  and  post-offices  are  important, 
but  of  lesser  importance  than  laws  which  make 
certain  acts  criminal;  yet  the  states  have  almost 


298  An  American  Transportation  System 

exclusive  jurisdiction  of  the  subject  of  crimes 
and  their  punishment.  No;  the  predominant 
characteristic  of  the  subjects  over  which  the 
law-making  power  was  delegated  to  the  nation 
is,  that  these  subjects  concern  what  we  broadly 
call  commerce — the  trade  relations  among  the 
people.  And  a  closer  examination  of  them 
discloses  the  fact,  that  they  have  to  do  almost 
exclusively  with  what  we  call  distribution  as 
distinguished  from  production  and  consumption. 
For  what  is  the  post-office  but  the  means  of 
intercommunication  among  the  people?  And 
what  is  the  currency  of  the  country  except  the 
circulating  medium  for  the  settlement  of  trade 
balances?  And  what  are  bankruptcy  laws  but 
facilities  for  the  uniform  distribution  of  trade 
losses?  Even  weights  and  measures  are  for  the 
most  part  the  means  of  standardizing  the  relations 
between  producers  and  consumers. 

If  to  these  powers  of  the  nation  you  add  the 
power  to  regulate  commerce,  including  transporta- 
tion, among  the  states,  it  will  be  at  once  seen  that 
the  powers  which  the  framers  of  the  constitution 
delegated  to  the  federal  government  over  its 
internal  affairs,  concerned  the  distribution  facilities 
of  the  nation.  It  was  to  keep  these  unclogged 
and  free  from  confusion,  that  authority  over  them 
was  taken  from  the  states.  If  these  subjects 
had  not  been  turned  over  to  the  central  power, 
see   how  our  distribution  facilities   would   have 


Constitutional  Amendment  Sought    299 

been  thrown  into  inextricable  confusion.  We 
might  have  had  to-day  forty-five  different  kinds 
of  coins  and  as  many  different  kinds  of  paper 
money;  forty-five  different  standards  of  weights 
and  measures;  forty-five  different  bankruptcy 
laws  (and  we  sometimes  have  had  nearly  that 
many) ;  forty-six  different  postal  systems — one 
for  each  state  and  another  between  the  states, 
just  as  we  have,  unfortunately,  forty-six  systems 
of  railways  and  railway  regulations,  one  in  each 
state  and  one  between  the  states ! 

Is  it  conceivable  that  the  men  who  framed  this 
great  law,  who  took  such  infinite  pains  to  keep 
under  national  control  every  agency  which  facili- 
tates free  inter-communication  and  trade  among 
the  people,  would  have  permitted  the  overwhelm- 
ingly great  means  of  inter-communication  to 
have  been  hampered  and  thrown  out  of  adjust- 
ment by  scores  of  conflicting  regulations,  had 
they  conceived  the  magnitude  and  importance 
of  our  railway  system?  And  especially  can  such 
an  idea  be  entertained,  when  we  see  that  they 
conferred  upon  the  nation  the  authority  to  make 
post-roads,  which  would  of  necessity  have  been 
under  exclusive  national  control,  even  though  they 
ran  into  the  very  heart  of  every  city  in  this  land  ? 
There  is  not  an  argument  in  favor  of  the  unlimited 
control  of  postal  affairs  by  the  central  government, 
which  is  not  equally  applicable  to  such  control 
of  the  facilities  of  transportation,  and  there  are 


300  An  American  Transportation  System 

a  score  of  potent  arguments  in  favor  of  the  latter 
which  are  not  applicable  to  the  former. 

For  what  reason  did  the  makers  of  our  consti- 
tution not  leave  it  to  the  several  states  to  es- 
tablish and  maintain  a  postal  service  within  the 
respective  states  for  their  own  citizens,  while  the 
United  States  carried  letters  which  were  ad- 
dressed by  the  citizens  of  one  state  to  the  citizens 
of  another  state?  No  doubt,  if  the  federal  consti- 
tution had  so  ordained,  the  provision  would 
have  been  considered  by  many  the  "palladium 
of  our  liberty."  Yet  had  the  federal  constitu- 
tion so  provided  concerning  our  postal  service, 
no  such  confusion  could  have  arisen  as  that 
which  follows  the  relegation  to  the  several  state 
governments  of  the  control  of  transportation  and 
railways  within  the  states,  while  leaving  to  con- 
gress their  control  as  between  the  states.  It  is 
the  simple  truth,  that  we  can  never  hope  to  get 
rid  of  the  wrongs  in  our  transportation  system 
until  it  is  brought  under  one  control,  nor 
can  we  ever  hope  to  have  it  controlled  until  it  is 
brought  under  one  control,  nor  can  we  ever  hope 
to  have  it  developed  into  its  perfection  as  a 
servant  of  the  people  until  it  is  free  from  the 
annual  stabs  of  forty-five  legislatures  and  one 
congress. 

If  this  matter  be  viewed  from  the  standpoint 
of  the  public  welfare,  then  it  is  obvious  that 
we  will  never  be    rid   of    our   weak,    wasteful, 


Constitutional  Amendment  Sought   301 

over-capitalizing,  fictitious-stock-issuing,  criminal, 
railway  financial  scheme;  so  long  as  we  have 
Kentucky  and  New  Jersey  railway  corporations 
owning  and  controlling  railways  in  distant  states. 
Yet  there  is  no  power  in  the  federal  congress  to 
prevent  the  existence  of  these  corporations,  or 
to  control  their  financial  methods  when  they  are 
created.  Nor  can  we  ever  hope  to  be  rid  of  this 
jumble  of  fictitious  railway  securities  which  now 
infest  the  markets,  perennially  sponging  up  the 
savings  of  the  people,  so  long  as  the  corporations 
which  issue  them  can  find  the  shelter  of  a  state 
which  will  permit  such  corporate  acts.  And  when 
will  come  a  time  when  such  a  state  may  not  be 
found?  If  stability  of  railway  securities  is  a 
desirable  thing,  how  ever  can  you  expect  to 
have  them  stable  while  corporations  may  issue 
them  at  their  will  and  different  securities  of  the 
same  company  range  all  the  way  from  nominal  to 
par  and  as  much  above  par  as  manipulation  may 
make  the  price? 

If,  on  the  other  hand,  you  view  this  matter 
from  the  standpoint  of  railway  corporations 
which  earnestly  desire  to  give  to  this  country 
a  first  class,  safe,  adequate  and  economical 
transportation  system,  how  can  you  expect 
them  to  accomplish  that  end,  while  they  are 
subject  to  conflicting  laws  of  different  states — 
while  they  may  not  raise  money  lawfully  in 
one   state,   without   having   their   right     to   do 


302  An  American  Transportation  System 

business  in  other  states  forfeited?  How  can 
you  expect  to  have  an  organized  and  co-ordi- 
nated transportation  system,  while  all  the  disor- 
ganizing and  disco-ordinating  forces  are  playing 
upon  their  several  parts? 

I  see  no  hope  for  an  honest,  safe,  adequate, 
economical,  transportation  system  in  this  country, 
until  the  states  surrender  the  semblance  of  author- 
ity which  they  now  have  over  intrastate  trans- 
portation, and  all  things  relating  either  to  the 
corporate  or  financial  affairs  of  railway  corpora- 
tions as  well  as  their  physical  operations  be  placed 
under  a  common  control.  Of  course,  this  cannot 
be  done  without  a  constitutional  amendment.  But 
let  me  say  now,  that  if  such  an  amendment  would 
have  the  effect  either  to  centralize  greater  power 
in  the  federal  government  or  create  a  transporta- 
tion monopoly,  I  would  a  thousand  times  sooner 
suffer  the  ills  we  have  than  even  suggest  a  change. 
It  is  chiefly  because  we  are  fast  drifting  to  an 
uncontrolled  and  uncontrollable  transportation 
monopoly,  and  because  the  power  of  the  federal 
courts  to  negative  the  legislation  of  the  states 
has  already  centralized  power  in  the  only  irre- 
sponsible branch  of  the  federal  government,  that 
I  think  a  constitutional  change  should  be  of  such 
character  that  it  will  bring  the  transportation 
monopoly  under  the  control  of  a  fixed  law,  and 
at  the  same  time  render  harmless  and  responsible 
the  centralized  control. 


Constitutional  Amendment  Sought   303 

A  Suggested  Constitutional  Amendment 

(Continued) 

Referring  back  to  the  man  of  common  sense 
we  met;  if  an  attempt  were  made  to  generalize 
his  rather  crude  ideas  on  the  subject  of  transporta- 
tion, they  would  seem  to  fall  naturally  into  two 
classes : 

1.  The  integration  of  all  our  means  of  trans- 
portation into  one  harmoniously  working  system. 

2.  To  make  all  questions  between  the  trans- 
portation system  and  the  people  judicial  questions, 
with  well  defined  rules,  however,  for  their  decision. 

Strange  as  it  may  seem,  his  ideas  are  quite  in 
line  with  the  tendency  of  the  age.  For  what  is 
the  interpretation  of  all  these  mergers,  absorptions 
and  consolidations  of  railways?  Plainly,  their 
meaning  is  that  there  is  a  rough  and  tumble 
attempt  being  made  to  eliminate  needless  friction, 
to  establish  a  harmonious  moving  equilibrium 
of  transportation  forces.  But  natural  evolution, 
though  thoroughly  effective,  knows  little  of 
justice.  This  integration  carried  on  by  the  process 
of  natural  evolution  is  cruel  in  its  mode  of  exter- 
minating the  weak,  and  savage  and  corrupting 
in  its  exercise  of  unrestrained  power.  Our  friend, 
therefore,  proposes  to  substitute  for  the  cruel 
process  of  natural  evolution,  an  intelligent  process 
by  which  the  rights  of  all  are  recognized,  and  the 
grand  end  still  attained. 


304  An  American  Transportation  System 

And  what  is  the  interpretation  to  be  put  upon 
all  these  impotent  legislative  acts  of  state  and 
nation?  It  is  simply  that  the  questions  with 
which  they  have  been  concerned  are  not,  under 
the  constitution  as  it  now  stands,  legislative  but 
judicial  questions. 

But  here  we  are  met  by  a  most  anomalous 
condition.  The  legislative  authorities,  state  and 
national,  have  power  to  legislate  upon  the  subject 
of  transportation,  but  having  legislated,  as  before 
often  stated,  the  courts  have  power  to  veto  that 
legislation.  But,  of  course,  the  courts  are  not 
endowed  with  any  power  to  say  what  the  legisla- 
tion should  be.  They  have  simply  the  power 
to  negative  legislative  action.  They  may  declare 
what  the  legislature  has  done  to  be  unjust  and 
unreasonable,  but  they  have  not  the  power  to  say 
what  would  be  just  and  reasonable — at  least  they 
have  not  that  power  without  encroaching  upon 
the  purely  legislative  domain.  And  such  exercise 
of  legislative  power  as  the  courts  are  able  to  avail 
themselves  of,  is  unadapted  to  settle  the  important 
questions  in  any  broad  or  general  way,  but  only 
by  piecemeal,  as  each  particular  question  comes 
before  them. 

To  obviate  this  anomalous  situation,  our  friend 
suggests  that  the  people  in  the  exercise  of  their 
supreme  legislative  power,  shall  define  the  rela- 
tions which  shall  exist  between  them  and  their 
transportation  system  in  such  a  manner  as  will 


Constitutional  Amendment  Sought   305 

be  binding  on  both  the  legislature  and  the  court. 
While  many  questions  of  a  judicial  character 
will  remain,  the  court  will  be  provided  with  well 
defined  rules  and  principles  to  govern  it  in  its 
decisions. 

Whether  the  makers  of  the  constitution,  had 
the  situation  then  been  as  it  is  now,  would  have 
inserted  the  provision  giving  congress  the  power  to 
regulate  transportation  throughout  the  United 
States,  no  one  can  more  than  surmise.  When 
power  was  granted  to  congress,  it  was  granted 
without  limitation;  when  it  was  denied,  there 
were  no  exceptions  or  provisos,  and  always  the 
most  general  terms  were  used.  But  all  this  aside, 
I  think  it  would  have  been  and  would  be  now, 
most  unwise  to  grant  to  congress  power  to  regulate 
transportation  both  state  and  interstate.  This 
chiefly  for  two  reasons : 

1.  Congress  might  not  use  its  power  in  the 
way  the  people  wish. 

2.  It  might  not  use  the  power  at  all. 

Only  the  latter  of  these  reasons  will  be  given 
any  space.  It  is  well  known  that  there  are  two 
kinds  of  constitutional  provisions:  one  is  self- 
executing  and  requires  no  legislative  act  to  give 
it  force.  It  becomes  the  law  and  the  supreme 
law,  immediately  upon  its  adoption.  The  other 
kind  is  a  mere  grant  of  power  to  the  legislature, 
giving  it  the  authority  to  legislate  upon  such 
and  such  subjects  if  it  choose  to  exercise  that 


306  An  American  Transportation  System 

power.  If  the  legislature  does  not  act,  the  consti- 
tutional provision  simply  lies  dormant  forever. 
Hence  if  there  were  a  constitutional  amendment 
which  merely  conferred  on  congress  the  authority 
to  regulate  transportation,  intrastate  as  well  as 
interstate,  it  might  never  do  anything. 

There  are  dangers  in  this.  One  branch  of  our 
congress  even,  could  long  defeat  the  will  of  the 
people,  and,  unfortunately,  it  has  not  been  found 
unwilling  to  do  so.  Again,  if  the  power  were 
given  congress  to  regulate  transportation  through- 
out the  United  States,  it  is  not  difficult  to  perceive 
that,  owing  to  the  multifarious  nature  of  present 
railway  obligations,  and  like  existing  conditions, 
any  attempt  of  congress  to  exercise  its  power, 
might  lead  to  a  conflict  with  other  constitutional 
provisions.  At  any  rate,  anything  that  congress 
under  such  a  grant  of  power  could  do,  would  be 
subject  to  challenge  in  the  courts. 

For  every  reason,  then,  in  my  opinion,  a  consti- 
tutional amendment  should  be  adopted  which, 
so  far  as  possible,  will  be  self-executing.  Such 
a  constitutional  amendment  might  be  roughly 
outlined  somewhat  as  follows : 

It  would  confer  original  jurisdiction  on  the 
Supreme  Court. 

A.  To  judicially  determine  the  value  of  the 
assets,  and  the  validity,  priority  and  equitable 
standing  of  the  liabilities  of  each  corporation 
engaged  in  the  transportation  of  persons,  com- 


Constitutional  Amendment  Sought    307 

modities  or  messages  within  the  United  States, 
or  between  the  ports  thereof,  except  such  corpora- 
tions as  are  exclusively  urban  and  such  others  as 
congress  might  exempt  from  the  operation  of  this 
provision.  And  thereupon  to  cause  to  be  issued 
to  the  holders  of  the  liabilities  of  such  corporations, 
according  to  their  respective  priorities  and  equities 
and  to  an  amount  not  in  excess  of  the  value  of 
the  assets  of  each  particular  corporation,  certifi- 
cates of  ownership  thereof,  equivalent  in  amount 
to  their  respective  claims,  every  pre-existing 
liability  of  each  of  said  corporations  (except 
current  debts)  becoming  thereupon  null  and  void. 
And  provide, 

B.  That  the  owners  of  such  certificates,  their 
assigns  and  successors,  should  constitute  a  body 
corporate  forever,  exclusively  to  transport  persons, 
commodities  and  messages  within  the  United 
States  and  between  the  ports  thereof,  on  terms 
of  uniformity  and  without  preferences  to  persons 
or  localities ;  that  the  capital  of  such  a  corporation 
should  be  the  value  of  its  facilities  and  should  be 
divided  into  shares  of  the  par  value  of  one  hundred 
dollars  each ;  that  it  should  be  managed  by  direc- 
tors, the  number,  duties  and  terms  of  office 
whereof  should  be  as  determined  by  its  share- 
holders; that  it  should  charge  for  its  services 
rates  which  should  be  sufficient  for  its  maintenance 
and  to  pay  dividends  on  its  shares  on  a  basis  of 
5%;  and  that  its  commodity  service  should  be 


308  An  American  Transportation  System 

so  classified  that  the  necessities  of  life,  according 
to  their  respective  money  values  per  weight  and 
bulk,  should  be  charged  the  lowest  rates.    And, 

C.  That  a  court  should  be  constituted,  having 
original,  exclusive  and  final  jurisdiction  in  any 
cause  wherein  complaint  should  be  made  that 
said  corporation  was  conducting  its  affairs  con- 
trary to  this  provision,  or  in  violation  of  any  act 
of  congress  made  in  pursuance  thereof;  and  in 
any  controversy  between  said  corporation  and 
its  employees.  That  this  court  should  have 
supervision  of  the  financial  affairs  of  said  corpora- 
tion ;  and  that  it  should  judicially  determine,  upon 
the  petition  of  its  directors,  or  the  public,  the 
necessity  for  new  or  additional  facilities  to  secure 
safety  or  adequacy  of  transportation  and  the 
cost  thereof,  and  the  approval  of  all  contracts 
relating  thereto,  and  the  issuance  and  sale  of 
additional  stock,  in  all  respects  upon  a  parity 
with  other  stock  of  said  corporation,  for  the  cost 
of  such  improvement;  and  that  it  should  have 
such  further  jurisdiction  as  congress  might  confer 
upon  it.    And, 

D.  That  said  corporation  should  pay  an 
annual  tax  of  i%  upon  its  capital  stock,  to  be 
distributed  to  the  several  states  according  to 
their  respective  populations. 

That  which  is  too  apparent  need  scarcely  be 
said.  Obviously  these  suggestions  are  but  the 
sketch  of  a  plan.  They  make  no  pretense  to  detail. 


Constitutional  Amendment  Sought   309 

It  has  been  attempted  to  make  the  key-note 
of  this  scheme,  justice  tempered  with  equity; 
justice  to  the  capital  invested  in  railways,  because 
it  gives  a  reasonable  return  upon  the  capital 
invested;  justice  to  the  people,  because  the  rates 
they  pay  will  be  sufficient  only  to  maintain  a 
transportation  system,  upon  the  efficiency  of 
which,  their  welfare  so  largely  depends;  justice 
tempered  with  equity,  because  the  state  in  its 
neglect  to  guard  the  rights  of  the  people  has 
permitted  the  growth  of  wrongs  to  which  it  has 
been  a  silent  party,  to  shirk  the  responsibility 
for  which  would  be  cowardly. 

It  is  especially  important  that  it  be  at  once 
perceived  that  there  is  nothing  revolutionary 
about  this  proposal.  It  but  marshals  us  in  the 
way  that  we  are  going.  But  it  pretends  to  sub- 
stitute intelligent  organizing  action  in  the  place 
of  brute  force.  It  endeavors  to  eliminate  the 
economic  waste  which  must  necessarily  follow  in 
the  footsteps  of  railway  evolution  as  it  has  been 
carried  forward  in  the  past,  and  as  it  will  be 
carried  forward  in  the  future,  if  left  to  itself. 

Proposed  and  Ideal  Transportation  Systems 
Compared 

Would  the  transportation  system  contemplated 
by  this  plan  conform  to  the  requirements  of  the 
ideal  system? 


310  An  American  Transportation  System 

Would  it  be  the  means  of  providing  and  main- 
taining a  system  at  once  safe  and  adequate  ? 

Would  it  destroy  the  possibility  of  the  disgrace- 
ful wastefulness  and  lack  of  economic  methods  of 
our  present  system? 

Would  it  serve  to  obliterate  all  preferences  as 
to  persons  and  places  in  the  use  of  transportation 
facilities? 

Would  it  remove  the  possibility  of  its  trustees 
using  its  capital  to  their  personal  and  illegal  profit? 

Would  it  eliminate  the  railways  from  American 
politics? 

These  questions  may  be  answered  briefly.  It 
has  been  shown  how  unsafe  and  inadequate  the 
system  is  at  present,  that  numerous  changes  must 
be  made  to  insure  safety,  that  a  vastly  increased 
mileage  is  necessary  to  insure  efficiency,  that 
billions  of  dollars  will  be  required  to  accomplish 
these  results  and  that  the  means  are  not  forth- 
coming to  bring  them  about.  The  primary  cause 
of  this  is  the  justly  deserved  loss  of  confidence 
which  the  management  of  our  railway  system 
has  suffered,  coupled  with  the  inherent  weakness 
of  our  railway  financial  method. 

If  the  people  were  convinced  that  their  invest- 
ment in  railroad  securities  would  bring  them  a  fixed 
return  of  five  per  cent.,  there  is  not  the  slightest 
doubt  that  the  millions  would  pour  forth  their 
dollars.  If  under  the  ruinous,  rotten  management 
that  has  prevailed  in  the  past,  if,  uncertain  whether 


Constitutional  Amendment  Sought    311 

they  would  ever  get  back  either  their  principal  or 
interest,  they  have  furnished  the  money  to  build 
the  system  as  it  has  been  built;  can  any  one  doubt 
their  willingness  to  come  forward  with  all  required 
amounts,  when  they  have  the  assurance  that  the 
transportation  scheme  herein  outlined  is  to  be 
the  permanent  American  railway  policy,  that  the 
financial  affairs  of  the  system  are  under  the  eye 
of  a  court,  that  improvements  and  new  roads 
would  be  made  only  after  judicial  investigation 
as  to  their  necessity,  and  that  awards  will  be 
made  only  after  due  scrutiny?  Aside  from  these 
considerations,  the  security  would  be  the  best 
in  the  world,  for  the  proposed  act  is  practically 
automatic ;  the  rates  would  be  such  as  to  produce 
the  revenue.  It  would  be  in  effect,  a  uniform 
tax  upon  all  who  use  the  transportation  facilities, 
in  proportion  to  the  benefits  received. 

If  it  be  said  that  these  changes  to  produce 
safety  and  efficiency  may  make  the  rates  higher 
than  at  present,  the  question  is  whether  the 
American  people  are  willing  to  pay  for  safety, 
or  would  rather  be  slaughtered  through  their 
parsimony?  I  do  not  know  whether  the  rates 
would  be  raised  or  lowered  and,  within  bounds, 
I  do  not  care.  But  this  I  do  know,  that  the 
American  people  have  never  yet  shrunk  from  a 
duty  no  matter  what  the  cost,  and  that  no  greater 
duty  rests  upon  them  than  this  of  providing  a 
safe  system  of  railroad  transportation. 


312  An  American  Transportation  System 

Would  the  system  be  economical?  This  at 
least  may  be  said,  that  the  stability  given  to  the 
securities  would  be  such,  as  to  forever  prevent  the 
possibility  of  such  losses  to  the  country  as  it  has 
sustained  through  railway  bankruptcies,  market 
manipulation  and  the  panics  of  the  past.  Such 
losses  as  these  billions  of  dollars  in  the  late  panic — 
more  than  double  the  cost  of  operating  all  the  roads 
during  the  same  period — could  never  again  occur. 

Something  has  been  said  above  on  the  security 
of  railway  investments.  It  may  be  added  here, 
that  the  only  possible  hazard  in  the  investment 
would  be  the  possibility  of  some  other  method 
of  transportation  supplanting  the  railway.  As 
to  this,  it  would  seem  that  human  ingenuity 
has  been  exhausted  in  the  application  of  the 
flanged  wheel  on  a  smooth  rail  over  a  level  road- 
bed, at  least  for  all  distant  travel  and  heavy 
land  traffic .  Doubtless  moti  ve  power  may  change , 
and  indeed  it  is  not  unlikely  that  a  power  cheaper 
and  better  than  either  steam  or  electricity  may 
be  devised.  But  as  to  wheels,  rails  and  roadbeds, 
they  will  stand  against  the  airship  for  some  time, 
at  least  for  heavy  freight. 

The  economy  resulting  to  the  whole  country 
from  the  securities  of  railways  being  made,  fixed 
and  stable  can  scarcely  be  over-estimated.  When 
it  is  remembered  that  one  sixth  of  the  wealth  of 
the  whole  nation  is  invested  in  these  securities, 
that  the  very  stability  of  many  institutions  depends 


Constitutional  Amendment  Sought   313 

upon  the  stability  of  railway  securities,  that  they 
are  the  principal  collateral  upon  which  commercial 
banks  make  their  loans;  it  will  be  readily  under- 
stood that  a  country  possessing  wealth  of  a  charac- 
ter so  undisputed  would  be  at  once  the  richest 
and  financially,  the  most  stable  country  in  the 
world.  The  stability  of  these  securities  would 
open  the  markets  of  the  world  to  them,  and  their 
readily  realizable  character  would  enable  our 
bankers  to  anticipate  times  of  money  stringency, 
by  their  conservative  use  in  foreign  markets. 
They  would,  in  fact,  become  the  balance  wheel 
of  American  finance.  It  can  hardly  be  doubted 
that  they  could  be  used  to  replace  the  growing 
deficiency  of  United  States  Government  bonds 
as  security  for  the  circulation  of  national  banks, 
or,  at  least,  serve  as  security  to  the  government 
for  temporary  loans,  if  we  are  to  continue  our 
national  bank  system. 

Not  to  compare  small  things  with  great,  there 
would  be  a  relatively  enormous  saving  in  the  cost 
of  the  operation  of  a  system  under  one  manage- 
ment. Thousands  of  employees,  for  the  most 
part,  of  the  least  desirable  class,  would  be  at  once 
lopped  off.  The  vast  army  of  political  parasites 
that  live  off  the  system,  the  tax  agents,  traffic 
solicitors,  and  some  thousands  of  unnecessary 
lawyers,  directors  and  like  expensive  luxuries, 
would  be  turned  out  to  make  a  living  by  means, 
at  least,  no  less  reputable. 


314  An  American  Transportation  System 

The  saving  resulting  from  wiping  out  senseless 
competition,  from  the  distribution  of  business 
from  over-worked  to  under-worked  roads,  from 
the  elimination  of  some  utterly  useless  and  there- 
fore burdensome  roads,  from  the  building  of 
unnecessary  and  therefore  burdensome  roads, 
would  mount  into  the  millions.  But  these  are 
pennies.  The  great  economy  to  the  country 
would  come  from  the  stability  of  railway  invest- 
ments. 

That  rebates  and  all  the  criminal  practices 
growing  out  of  the  preferences  shown  to  persons 
and  places  would  at  once  disappear  is  evident; 
for  with  the  elimination  of  competition  would 
go  every  excuse  for  their  existence. 

That  this  system  would  do  away  with  the 
possibility  of  the  manipulation  of  railways  and 
their  finances  by  their  trustees,  that  such  a  mon- 
strous outrage  as  the  late  Alton  deal  could  never 
occur  again,  goes  without  saying. 

After  the  consolidation  of  all  roads  into  one 
corporation,  the  construction  of  new  roads  and 
the  issuance  of  the  stock  therefor  being  subject 
to  judicial  decree,  the  trustees,  to  advantage 
themselves  would  have  to  resort  to  the  methods 
of  the  criminal  till-tappers, — in  short,  make  them- 
selves ordinary  thieves,  instead  of  respectable 
"  predatories. "  The  Stock  Exchange  would,  so 
far  as  railway  securities  are  concerned,  become 
what  its  name  indicates  it  should  be — a  market 


Constitutional  Amendment  Sought   315 

where  fair  values  may  be  received  from  the  ex- 
change of  values,  instead  of  a  gamblers'  resort. 
A  propos,  it  may  be  remarked  in  passing,  that 
having  once  laid  this  scheme  before  a  prominent 
stock-broker,  he  asked  that  he  be  given  notice 
of  its  adoption  so  he  could  sell  his  seat  on  the 
Exchange.  Argument  that  legitimate  business 
would  take  the  place  of  illegitimate  was  without 
avail. 

But  all  other  advantages  do  not,  in  my  opinion, 
weigh  in  the  balance  with  that  which  would  come 
from  the  banishment  of  the  railroads  from  Ameri- 
can politics.  This  government  could  survive  the 
destruction  of  its  railway  system,  but  it  cannot 
survive  the  destruction  of  the  manhood  of  its 
people.  Popular  government  cannot  persist  with 
a  corrupt  populace.  It  would  be  cheap  to  the 
American  people  to  give  to  every  rascal  the  par 
value  of  his  stealings,  if  by  so  doing  we  could 
forever  be  rid  of  his  pernicious  influence  upon 
American  social  and  political  life. 

Seeing  that  this  proposed"  system  answers  in 
a  marked  degree  the  requirements  of  an  ideal 
transportation  system,  it  still  has  to  answer 
sundry  inquiries  of  great  importance. 

Is  the  proposal  just  to  the  existing  system? 

Can  it  in  any  way  work  evil  to  the  American 
people? 

Does  it  tend  to  the  concentration  of  power  in 
the  federal  government  at  the  expense  of  the  state? 


316  An  American  Transportation  System 

Would  it  tend  to  destroy  individual  incentive? 

Would  it  meet  the  views  of  the  stock  gamblers, 
manipulators,  banking  syndicates  and  the  like? 

Is  it  practical  ? 

The  last  of  these  inquiries  may  be  taken  up 
first.  Obviously  if  the  plan  is  not  practical,  it  is 
unnecessary  to  consider  any  other  objections 
to  it,  while  any  other  objection  will  appear  all  the 
more  prominent  when  considering  whether  the 
scheme  is  practical. 

IS  THE  PROPOSAL  PRACTICAL? 

I.    Can  our  Railways  be  Fairly  and  Justly 
Appraised? 

Who  shall  appraise  them  ? 

We  shall  now  proceed  with  the  successive 
steps  by  which  our  unco-ordinated  transportation 
facilities  may  be  organized  into  an  harmoniously 
working  transportation  system.  Obviously  if 
these  parts  are  to '  be  joined  together,  the  first 
requirement  of  justice  is  that  the  respective 
members  be  fairly  appraised.  Who  shall  be  the 
appraisers  ? 

There  are  several  ways  of  making  an  appraise- 
ment. The  ordinary  method  is  for  each  opposing 
interest  to  appoint  one  or  more  appraisers  and 
if  these  fail  to  agree  they  appoint  an  umpire  who 
decides  between  them.    This  method,  while  appa- 


Constitutional  Amendment  Sought   317 

rently  fair,  has  certain  well  known  disadvantages. 
As  the  appraisers  who  are  appointed  are  always 
partisans,  they  are  much  more  like  attorneys 
than  judges,  so  that  the  decision  is  really  left 
to  the  umpire.  Besides  such  appraisements  are 
frequently  subject  to  contest  from  some  cause. 
The  verdict  of  mankind  is  that  the  best  method 
of  settling  a  disputed  issue  is  to  leave  it  to  an 
impartial  judicial  tribunal.  Nor  am  I  greatly 
in  favor  of  commissions.  These  bodies  are  neither 
administrative  nor  judicial.  Their  decisions,  how- 
ever righteous,  are  viewed  with  indifference  and 
unfinality.  The  inherited  respect  due  to  a  judicial 
tribunal  is  lacking.  And  in  addition  to  these 
reasons  there  are  sundry  other  matters  which 
are  necessary  concomitants  of  appraisement, 
such  as  the  determination  of  the  respective  rights 
of  security  holders,  which  are  purely  judicial 
in  their  character.  Undoubtedly  the  same  tri- 
bunal which  makes  the  appraisement  should  have 
jurisdiction  of  the  entire  subject  matter. 

I  think  it  will  be  agreed  by  all,  that  the  judicial 
action  contemplated  should  be  performed  by  one 
and  not  by  many  tribunals.  The  uniformity 
and  consistency  of  results  so  requisite  to  such  an 
undertaking,  could  only  be  effected  by  one  court 
possessed  of  jurisdiction  to  call  before  it,  and 
take  cognizance  of,  every  interest  involved. 

We  have  the  choice  of  conferring  such  juris- 
diction upon  an  existing  tribunal  or  creating  a 


31 8  An  American  Transportation  System 

new  one.  Above  all  things,  it  should  be  a  tribunal 
in  which  all  the  people,  and  all  those  interested 
in  the  result,  should  have  the  most  absolute 
confidence.  If  it  were  a  tribunal  specially  created 
for  the  purpose,  it  might  be  subject  to  the  suspicion 
that  its  members  were  appointed  because  of 
preconceived  opinions.  As  the  appointing  power 
would  be  lodged  with  the  president,  his  own  strong 
views  as  to  the  results  desired,  would  almost  of 
necessity  lead  him  to  the  selection  of  men  known 
to  hold  like  views;  he  certainly  would  not  choose 
those  holding  opposite  views.  The  confirming 
power  being  in  the  senate,  it  is  not  unlikely  that 
the  whole  matter  would  resolve  itself  into  some- 
thing of  a  political  farce,  if  nothing  worse. 

It  would  therefore  seem  that  it  would  be  better 
to  confer  this  great  power  upon  a  tribunal  already 
in  existence,  accustomed  not  only  to  recognized 
forms  of  procedure,  but  to  dealing  impartially  and 
therefore  judicially  with  causes  brought  before  it. 

There  is  another  factor  of  almost  equal  import- 
ance to  be  kept  in  view.  Such  a  tribunal  should 
possess  not  only  original  but  final  jurisdiction  to 
determine  all  questions,  and  should  determine 
them  all  at  the  same  time.  The  magnitude  of 
the  interests  involved  is  such,  that  quite  every 
case  would  be  taken  to  the  court  of  last  resort, 
if  they  were  required  to  be  first  submitted  to 
inferior  tribunals.  If,  on  the  other  hand,  a  new 
court  were  to  be  created  with  final  jurisdiction, 


Constitutional  Amendment  Sought    319 

we  would  have  the  evil  of  two  courts  of  last 
resort.  For  all  these  and  many  other  reasons, 
it  would  seem,  that  the  proper  tribunal  to  which 
this  important  matter  should  be  referred,  is  the 
Supreme  Court  of  the  United  States. 

It  would  indeed  seem,  at  first  blush,  anomalous 
to  confer  upon  the  Supreme  Court  original  juris- 
diction in  such  a  proceeding.  If  it  were  a  question 
involving  the  dignity  of  the  court;  it  might  be 
answered  that  not  in  all  times  past  have  causes 
of  greater  moment  been  presented  to  any  court. 
Involving,  as  in  their  aggregate  they  do,  the  rights 
of  at  least  a  million  people  who  are  directly  inter- 
ested in  the  securities  of  transportation  companies, 
and  probably  seven  millions  more  who  are  in- 
directly interested,  and  of  the  whole  people  as  the 
users  of  the  system ;  involving  the  relations  of  the 
million  and  a  half  of  employees  of  the  railway  cor- 
porations ;  involving,  also,  one-sixth  of  the  wealth 
of  the  United  States,  and  indirectly  affecting  the 
total  wealth  of  this  country,  the  tribunal  could 
not  exist  whose  dignity  would  be  lowered  by  hear- 
ing such  a  cause. 

Of  course  I  do  not  imagine  that  the  Supreme 
Court  would  itself  sit  or  hear  evidence  in  all  or 
possibly  in  any  of  these  causes.  The  proceedings 
would  naturally  fall  to  the  equity  side  of  the  court, 
and,  the  issues  being  made  up,  the  court  would 
refer  the  cases  to  commissioners  to  take  the  testi- 
mony and  report  it  to  the  court. 


320  An  American  Transportation  System 

It  is  essentially  the  province  of  the  Supreme 
Court  of  the  United  States  to  determine  questions 
arising  under  the  constitution.  Original  juris- 
diction in  certain  controversies  is  conferred  upon 
it  by  the  constitution.  There  would  be  no  objec- 
tion to  conferring  original  jurisdiction  upon  it  in 
this  matter,  except  the  business  which  would  be 
added  to  the  court.  But  inasmuch  as  every 
matter  would  eventually  be  carried  to  it  anyway, 
even  if  original  jurisdiction  were  given  to  inferior 
federal  judges,  it  is  not  clear  why  any  greater 
amount  of  labor  would  fall  to  it  in  one  way  than 
in  the  other,  especially  as  all  the  labor  of  taking 
testimony  would  be  done  by  the  commissioners 
of  the  court. 

The  inventory  and  appraisal  of  railways 

A  determination  with  anything  like  accuracy 
of  the  actual  value  of  the  property  employed 
in  the  whole  transportation  system  of  the  United 
States,  is  a  problem  so  gigantic  that  to  most 
people  it  would  appear  impossible.  Involving,  as 
it  does,  an  assumed  value  of  from  twelve  to  eight- 
een billions  of  dollars — an  amount  inconceiv- 
able in  the  concrete;  distributed  as  this  property 
is  over  territory  3000  miles  in  breadth  by  2000 
miles  in  length,  with  varying  mileage-cost  of 
construction,  with  bridges,  excavations,  tunnels, 
fills  and  terminals ;  of  level  road-beds  and  moun- 


Constitutional  Amendment  Sought   321 

tain  climbers ;  merely  to  discuss  it  seems  thankless 
and  staggering.  If  viewed  in  all  its  complexity — 
as  railway  people  desire  it  to  be  viewed  when 
they  seek  to  deter  inquiry — instead  of  in  its 
simplicity,  the  undertaking  may  as  well  be  given 
over. 

The  valuation  of  railways  by  each  other 

But  there  are  some  things  well  worth  remem- 
bering. All  these  vast,  heterogeneous  properties 
have  been  produced.  Almost  inconceivably  great 
and  complex  as  some  of  the  systems  now  are, 
they  are  all  made  up  of  individual  railroad  units. 
Not,  indeed,  of  railroad  units  of  uniform  cost  or 
value,  but  nevertheless  of  individual  units.  The 
Pennsylvania  road  is  made  up  of  some  two  hundred 
odd  roads.  So  also,  but  to  less  extent,  are  other 
systems.  These  systems  have  been  built  up  by 
processes  of  purchase,  merger,  leasing  and  the 
like.  Is  it  possible  that  in  these  processes  of 
consolidation  of  railroads  they  have  not  been 
valued?  Do  railroads  buy  other  railroads,  or 
do  they  buy  large  interests  in  each  other,  without 
regard  to  the  question  of  intrinsic  values?  Of 
course  they  do  not.  To  be  sure,  I  would  not 
claim  that  the  mode  of  valuing  roads  so  bought, 
merged  .leased  and  consolidated,  is  the  true  method 
of  valuation.  I  mention  the  fact  merely  to  show 
that  when  railroad  people  want  to  value  a  railroad 


322  An  American  Transportation  System 

it  can  be  done.     It  is  only  when  they  do  not  want 
to  do  it  that  it  becomes  an  utter  impossibility. 

The  "cost  of  road'*  accounts 

There  is  one  other  thing  worth  remembering; 
not  only  have  all  these  consolidated  roads  been 
valued  for  purpose  of  purchase,  lease,  merger, 
etc.,  and  not  only  have  the  great  systems  been 
buying  enormous  blocks  of  stocks  of  each  other, 
thus  implying  the  valuation  of  each  by  the  other, 
but  there  is  another  fact  of  even  greater  signifi- 
cance. It  is  this.  Railroads  have  now  been  in 
operation  so  long,  and  so  thoroughly  and  carefully 
have  their  accountants  kept  track  of  every  item 
which  enters  into  their  problems,  whether  relating 
to  traffic,  to  operating  expenses,  to  maintenance 
of  ways  and  equipment,  or  to  the  cost  of  construc- 
tion, that  there  has  resulted  a  body  of  statistics 
at  once  the  most  accurate  and  complete  which 
exists  on  any  subject  whatsoever. 

Nor  is  this  all.  The  railroads  have  kept  ac- 
counts, and  they  issue  every  year  summary 
statements  of  these  accounts,  the  details  of  which 
are  supposed  to  be,  and  generally  may  be  found, 
in  their  books.  At  the  head  of  each  one  of  these 
yearly  balance  sheets  for  each  and  every  road 
will  be  found  the  items,  "Cost  of  Road"  and 
"Cost  of  Equipment,"  and  in  some  instances  the 
"cost"  and  the  valuation  of  the  other  compara- 


Constitutional  Amendment  Sought   323 

tively  few  items  which  make  up  the  assets  of  a 
railway ;  as,  for  instance,  the  "  cost  of  real  estate, " 
"cost  or  market  value  of  securities  of  other  com- 
panies owned,"  etc.  In  short,  the  aggregate  of 
these  items  of  cost  as  pertaining  to  any  particular 
road,  shows  the  sum  total  which  every  item  of 
property  owned  by  the  railroad  is  supposed  to 
have  cost  it.  Of  course,  the  aggregate  of  the 
"costs"  of  all  roads  is  but  the  sum  of  individual 
costs,  and  this  sum  total  of  the  cost  of  all  the 
important  railroads  and  their  equipment  in  the 
United  States  on  the  30th  day  of  June,  1907,  was 
$13,364,275,191.  (I  call  your  attention  to  the 
last  figure  of  $1.00  as  showing  how  exact  the 
railroads'  accountants  are.) 

But  this  sum  does  not  represent  all  the  items 
which  the  railways  claim  as  assets.  It  represents 
only  the  bare  cost  of  the  roads  and  their  equip- 
ment. The  roads  own  other  more  or  less  valuable 
assets,  consisting  mostly  of  real  estate,  materials 
and  supplies,  cash  on  hand,  amounts  due  from 
other  roads,  and,  largest  of  all,  stocks  and  bonds 
owned  by  them  in  other  companies.  These 
items,  when  added  to  the  cost  of  road  and  equip- 
ment, bring  what  the  railways  call  their  grand 
total  of  assets  up  to  $18,649,289,250,  as  of  June 
30th,  1907. 

If  therefore,  to  inventory  and  appraise  the 
assets  of  any  one  road,  or  the  assets  of  the  entire 
system  of  roads,  it  was  only  necessary  to  ascertain 


324  An  American  Transportation  System 

the  cost  of  the  roads  and  their  equipment  and  the 
value  of  all  their  other  assets,  the  problem  would  be, 
from  the  railroad  standpoint,  one  of  exceeding 
simplicity.  If  the  court  accepted  the  railways' 
figures  as  correct,  the  entire  transaction  of  inven- 
torying and  appraising  the  roads  could  be  com- 
pleted in  a  day,  by  the  mere  production  of  their 
inventories  and  balance  sheets. 

But  I  apprehend  that  the  government,  repre- 
senting the  public  interest,  would  not  be  content  to 
accept  the  railroads'  books  as  conclusive  evidence 
of  the  cost  or  value  of  their  assets.  It  would  be 
proper,  if  not  necessary,  to  have  expert  account- 
ants examine  their  books  of  account;  for  it  is 
well  known  that  in  the  past  no  inconsiderable 
amount  of  book-keeping  jugglery  has  been  in- 
dulged in.  This  would  take  time,  ability  and 
honesty,  and  nothing  less  than  a  most  thorough 
and  complete  cross  examination  of  the  accounts 
of  the  companies  would  ever  satisfy  a  justly  sus- 
picious public. 

Nor  would  the  government  be  compelled  to 
rely  upon  the  accounts  of  the  railways  as  to  their 
cost  of  construction,  but  it  could,  and  should 
employ  competent  engineers  to  make  careful 
estimates  of  the  cost  of  replacing  the  roads. 
This  would,  of  course,  require,  if  the  work  was 
done  expeditiously  a  vast  crew  of  engineers 
working  simultaneously  over  the  United  States. 
But  both  the  magnitude  and  difficulty  of  this 


Constitutional  Amendment  Sought   325 

work  are  much  more  imaginary  than  real.  For 
it  must  be  remembered  that  nearly  all  of  these 
roads  were  built  in  sections  by  private  contractors, 
and  if  there  have  been,  and  are,  railway  contractors 
who  have  been,  and  are,  willing  to  risk  their  money 
by  taking  contracts  to  build  from  ten  to  one  hun- 
dred miles  or  more  of  road,  without  having  any- 
thing to  guide  them  but  the  plans  and  surveys, 
there  are  certainly  plenty  of  men  who  are  compe- 
tent to  estimate  the  cost- value  of  the  same  work 
when  it  lies  before  them. 

While  it  is,  of  course,  impossible  accurately  to 
ascertain  the  original  cost  of  the  construction  of 
many  of  the  roads,  there  is  no  inherent  difficulty 
in  ascertaining  the  cost  of  their  replacement,  or 
the  value  of  their  other  assets.  All  the  require- 
ments are  time,  skill  and  honesty,  the  latter  two 
being,  indeed,  qualities  which  are  not  picked 
up  every  day. 

It  is  not,  of  course,  expected  that  the  conclusions 
thus  arrived  at  would  be  figured  down  to  dollars 
and  cents.  If  they  came  within  millions,  all 
reasonable  requirements  would  be  satisfied. 

But  for  some  reason  or  other,  whenever  there 
is  an  intimation  made  that  roads  should  be 
"physically  valued,"  as  it  is  called,  a  terrible 
howl  goes  up  from  the  railroads  and  from  their 
advocates.  It  would  almost  seem  as  though  there 
was  something  inherently  ridiculous  in  the  pro- 
position.    An  endeavor  to  ascertain  what  makes 


326  An  American  Transportation  System 

this  proposition  so  ridiculous  results  in  the  discov- 
ery that  the  railways  claim  that  the  "physical 
value"  of  their  roads  is  not  a  just  criterion  by 
which  to  judge  their  actual  value.  Looking  at 
the  matter  from  all  sides,  one  is  led  to  suspect, 
either  that  the  items  of  cost  of  roads  and  equip- 
ment, as  found  on  railway  books,  would  not  be 
justified  by  an  actual  inventory  and  appraisement, 
or  else  that  there  is  some  item  of  value  which  a 
physical  valuation  would  overlook.  Presuming 
for  the  moment,  that  the  books  have  been  honestly 
kept,  let  us  see  what  this  overlooked  item  of 
value  is.  I  presume  it  is  that  intangible  and 
incorporeal  asset  of  a  going  business  which  may 
be  called  its  franchise,  its  right  to  do  business, 
the  value  of  an  established  business,  or,  in  a  some- 
what larger  sense,  the  "  good  will "  of  an  established 
business.  The  immediate  and  exact  question 
now  to  be  considered  is,  whether  this  element  of 
value  can,  or  should  be,  taken  into  consideration 
in  an  attempt  to  arrive  at  the  value  of  any  particu- 
lar railway  or  the  value  of  the  transportation 
system  as  a  whole. 

The  franchise  value  of  railways 

On  this  subject  one  may  find  any  amount  of 
diverse  views.  On  the  one  hand  there  are  the 
extremists  who  contend  that  a  railway  can  have 
no  value  over  the  cost  of  its  replacement.    They 


Constitutional  Amendment  Sought   327 

are  the  kind  of  people  who  claim  that  the  railways 
have  already  robbed  the  country  of  enough; 
that  by  watering  and  manipulation  of  stocks  the 
"predatory  rich"  have  made  themselves  multi- 
millionaires by  their  own  fiat.  On  the  other  hand, 
you  will  hear  railroad  men  claim  that  their  brains 
built  up  the  country,  unmindful  of  the  fact  that 
the  upbuilding  of  the  country  itself,  as  it  has 
increased  in  population  and  industries,  has  made 
many  a  sick  rail  a  dividend  payer.  Sometimes 
one  would  almost  think  that  the  railway  men 
of  the  present  day  claim  that  they  invented  the 
railroad,  and  are  entitled  to  the  inventors'  profits. 
Sometimes  one  will  hear  that  the  watering  of 
stocks  is  justified,  because  such  stock  is  of  no 
great  value  any  way,  although  it  may  become  val- 
uable in  time.  For  instance,  note  the  opinion  of 
an  able  railway  man  recently  given  out  apparently 
in  all  solemnity.  I  quote  his  exact  words: 
"  As  I  said  before,  while  some  stocks  may  be  watered, 
it  is  only  a  question  of  time  when  that  water  will  be 
made  good,  when  it  will  be  solid  land  and  no  water 
growth.  The  progress  and  development  of  the  coun- 
try are  so  great  and  so  rapid  that  all  watered  stocks 
will  be  on  a  rock  bottom  basis." 

A  man  who  could  calmly  claim  that  it  is  right 
to  issue  hundreds  of  millions  of  dollars  of  worthless 
paper,  and  sit  down  until  the  marvelous  growth 
and  development  of  the  country  make  that  paper 
worth  par  or  better,  is  beyond  the  pale  of  argu- 


328  An  American  Transportation  System 

ment;  he  needs  either  an  iron  hand  over  him  or 
an  iron  cage  around  him.  What  that  man  said 
was  in  reality  this:  "I  have  the  right  to  lay 
the  whip  upon  the  backs  of  the  farmers,  merchants 
and  manufacturers  of  this  country  and  of  the 
consumers  of  all  products,  and  make  them  work 
for  me  for  ten  years  in  order  that  my  counterfeit 
money  may  become  real  money."  A  proposition 
so  monstrous  would  be  inconceivable  were  we  not 
so  accustomed  to  hearing  it. 

Nevertheless,  there  may  be  a  value  in  a  railway 
in  excess  of  what  it  would  cost  to  replace  it.  By 
a  straight  course  of  honest  management  and 
dealings  it  may  be  able  to  produce  an  income  on 
its  cost  greater  than  the  rate  which  we  would  say, 
the  money  invested  in  it  would  justify  it  in  having. 
But  here  we  encounter  very  great  difficulties. 
In  the  first  place,  we  are  unable  to  apply  to  the 
railway  the  rules  which  are  applicable  to  such 
affairs  in  general.  For  instance:  a  manufacturing 
establishment  may  be  earning  30%  or  40%  on 
its  invested  capital;  the  value  of  such  a  business 
is  three  or  four  times  the  actual  amount  of  the 
money  invested  in  it.  The  reason  for  this  is, 
that  there  is  no  legal  limit  to  the  price  at  which 
a  manufacturing  establishment  may  sell  its 
products,  and,  therefore,  no  limit  to  the  amount 
of  its  profits. 

But  in  the  case  of  the  railway  the  proposition 
is  exactly  reversed.     The  state  claims  and  exer- 


Constitutional  Amendment  Sought   329 

rises  the  right  to  limit  the  amount  which  railways 
may  earn.  Therefore,  the  amount  which  they 
actually  do  earn  under  their  restricted  charges, 
is  but  a  poor  criterion  by  which  to  judge  the 
value  of  the  road  over  and  above  the  actual  cost 
price,  or  the  cost  of  replacing  it,  or  the  capital 
invested  in  it.  Still,  so  far  as  this  element  of 
value  is  concerned,  it  is  perhaps  the  just,  if  not 
the  only  rule  by  which  we  can  be  guided. 

If  we  take  the  case  of  a  road  which  cost,  and 
is  capitalized  at,  say  one  million  dollars,  and  if 
we  say  that  under  the  restricted  charges  which 
that  railroad  company  has  been  required  to  make, 
it  has  been  able  to  earn  dividends  of  10%  above 
all  expenses,  and  if  we  say,  under  our  new  law, 
that  reasonable  rates  are  such  as  will  produce 
an  income  of  5  %  on  invested  capital,  it  is  obvious 
that  such  a  road  has  an  intrinsic  value  greater 
than  its  actual  cost,  greater  than  its  cost  of  replace- 
ment and  greater  than  its  capitalization.  If  this 
is  the  right  way  to  look  at  it,  it  becomes  obvious 
that  the  question  of  franchise  value  is  one  which 
must  be  determined  as  to  each  particular  road 
upon  its  own  merits.  There  are  some  so  grossly 
over-capitalized  that  they  pay  no  dividends  at 
all,  and  some  few  that  are  not  even  able  to  pay 
interest  on  their  funded  debt.  As  to  all  such 
roads,  it  is  apparent  that  they  have  no  franchise 
value,  no  good  will,  nor  anything  which  should 
be  added  to  the  actual  cost  of  replacing  the  road. 


330  An  American  Transportation  System 

The  next  evidence  of  value  is  the  market  value 
of  the  securities  of  a  railway.  As  was  stated 
above,  ordinarily,  the  best  test  of  the  value  of 
anything  is  what  it  will  sell  for  in  a  free  market, 
that  is,  a  market  subject  to  no  other  fluctuations 
than  such  as  are  caused  by  the  law  of  supply  and 
demand.  Obviously,  if  the  sale  is  a  forced  sale, 
like  a  sheriff's  sale,  it  could  be  no  accurate  test 
of  value.  Likewise,  if  the  market  is  subject  to 
artificial  manipulation,  sales  made  in  such  a 
market  afford  but  a  poor  test  of  value. 

The  New  York  Stock  Exchange  is  the  market 
for  American  railway  securities.  If  we  could  in- 
dulge in  the  presumptions  that  the  par  value  of  all 
railway  stocks  and  bonds  had  been  paid  into  the 
treasuries  of  the  companies,  and  that  the  money 
so  received  had  been  expended  in  the  construction 
and  equipment  of  railways,  and  that  the  railways 
had  been  permitted  to  charge  rates  which  would 
return  a  fair  profit  on  the  capital  invested,  then 
these  stocks  and  bonds  ought  to  have  at  least 
average  quotations  of  par  in  that  great  mart. 
Railway  securities  would,  under  such  conditions, 
have  a  market  value  at  least  equal  to  their  face 
value,  or  about  $15,600,000,000,  as  of  June  30, 
1907. 

Rather  unfortunately  for  the  railways,  the 
aggregate  New  York  Stock  Exchange  value  of 
their  securities  is  some  billions  of  dollars  less 
than   their  aggregate   par  value.     Inasmuch  as 


Constitutional  Amendment  Sought   331 

railways  have  never  been  compelled  by  law  to 
reduce  their  charges  below  what  they  could  prove 
in  court  to  be  reasonable,  and  therefore  should 
have  been  able  to  earn  an  income  on  an  honest 
capitalization,  it  must  be  that  the  general  public 
values  railways  securities  very  much  below  their 
par  value. 

Now,  it  is  obvious  to  any  one  who  knows  any- 
thing about  it,  that  the  Stock  Exchange  quota- 
tions of  railway  securities  on  any  particular  day, 
may  be  far  off  from  their  actual  value;  for  there 
can  be  no  such  fluctuations  in  actual  values  as  the 
quotations  of  the  Exchange  show,  amounting  at 
different  periods  to  as  much  as  from  100  to  200%. 
But  while  the  quotations  for  any  day  are  no 
just  criterion  of  value,  yet  upon  the  whole,  cover- 
ing a  long  period  of  time,  the  average  of  stock- 
market  values  is  perhaps  not  very  far  from  the 
actual  values  of  securities. 

If,  for  instance,  we  could  take  a  period  of  five 
or  ten  years,  and  average  the  quotations  during 
the  entire  period,  it  is  not  unlikely  that  the  fair 
average  value  of  the  stock  of  any  particular  road 
would  be  arrived  at.  Doubtless,  there  are  many 
things  which  would  verify  this  conclusion.  I 
refer  to  it  now  as  a  mode  of  valuation,  more 
particularly  because  the  railways  having  listed 
their  securities  on  the  Exchange,  should  be  the 
last  to  complain  of  the  facts  as  they  are  shown  by 
the  market  which  they  themselves  have  selected. 


33 2  An  American  Transportation  System 

As  above  stated,  it  is  perhaps  unfortunate  for  the 
railways  that  the  average  market  value  of  their 
securities  is  some  billions  of  dollars  below  their 
face  value,  and  some  more  billions  of  dollars  below 
the  total  claimed  value  of  their  assets.  Of  course 
the  Stock  Exchange  value  should  be  a  repre- 
sentation of  the  value  of  the  total  assets  of  a 
corporation.  It  may  be  strongly  suspected  that 
the  objections  which  the  railway  companies  have 
to  an  inventory  and  appraisement  of  their  assets 
is  based  not  so  much  on  the  intrinsic  difficulty 
of  making  the  valuation,  but  rather  on  the  fact 
that  the  valuation  when  made  would  show,  as  the 
market  quotations  of  their  stocks  show,  that  their 
assets  are  not  worth  within  several  billions  of 
dollars  of  what  the  railroad  corporations  claim 
they  are  worth. 

Thus  it  would  appear  that  to  appraise  railways, 
more  and  better  evidence  as  to  their  value  may 
be  produced  than  is  usually  produced  in  a  court 
of  justice  to  determine  the  disputed  value  of 
property  in  litigation.  This  evidence  may  be 
summarized  as  follows : 

i.  Evidence  from  the  books  of  railway  com- 
panies, or  builders,  showing  the  original  cost  of 
construction,  as  well  as  of  any  permanent  im- 
provements affecting  the  original  cost.  Likewise 
the  cost  of  all  real  estate  with  its  improvements, 
the  cost  of  equipment  and  the  cost  of  any  other 
assets. 


Constitutional  Amendment  Sought    333 

2.  The  cost  of  replacing  any  railway  and  its 
appurtenances  at  the  time  of  the  appraisal. 

3.  The  average  market  value  of  a  railway's 
securities  over  a  period  sufficient  to  even  up  the 
effects  of  artificial  depression  and  exaggeration 
of  values. 

4.  The  commercial  value  of  each  particular 
road  based  on  its  earning  power  under  rates  here- 
tofore deemed  reasonable  by  the  government. 
It  may  not  be  inappropriate  to  add,  that  in  1904 
the  Interstate  Commerce  Commission  estimated 
the  commercial  value  of  all  the  railway  property 
in  this  country  on  practically  the  basis  of  the  last 
paragraph.  The  total  value  of  the  assets  of  all 
the  railways  as  shown  by  their  consolidated  bal- 
ance sheet  on  June  30,  1904,  was  $15,495,504,651 
The  Commission's  valuation  was  .   11,244,852,000 

Difference $4,250,652,651 

II.    Marshaling  Railway  Assets  and 
Securities 

The  scheme  herein  proposed  contemplates  the 
extinguishment  of  the  multifarious,  malodorous, 
polyglot  of  existing  railway  securities,  and  the 
substitution  therefor,  to  the  extent  of  the  value 
of  each  railway,  of  a  simple  uniform  security 
bearing  a  fixed  income.  The  value  of  each  rail- 
way having  been  determined,  the  next  step  is 
the  determination  of  the  amount,  character,  valid- 


334  An  American  Transportation  System 

ity,  priority  and  equitable  standing  of  the  bonds, 
stocks  and  other  liabilities  of  each  road.  For  let 
it  be  remembered,  that,  while  the  purpose  is  to 
organize  all  our  transportation  facilities  into  a 
transportation  system,  yet  in  the  process  of 
consolidation  each  road  would  stand  upon  its 
own  merits.  In  the  case  of  each  road,  the  aggre- 
gate of  new  securities  would  just  equal  the  value 
of  the  particular  road,  while  the  aggregate  of  all 
new  securities  would  just  equal  the  value  of  all 
transportation  facilities  consolidated.  But  the 
adjustment  of  the  rights  of  the  holders  of  liabili- 
ties in  any  one  road,  would  not  at  all  be  affected 
by  the  adjustment  of  the  rights  of  like  holders 
in  other  roads. 

Redistribution  of  securities 

Broadly  speaking  there  can  exist,  as  to  each 
railway  corporation,  but  one  of  three  conditions: 

i.  The  actual  value  of  a  road  may  just  equal 
the  aggregate  par  value  of  all  its  bonds,  stocks 
and  other  liabilities. 

2.  The  actual  value  of  a  road  may  be  greater 
than  the  aggregate  par  value  of  all  its  bonds, 
stocks  and  other  liabilities. 

3 .  The  actual  value  of  a  road  may  be  less  than 
the  aggregate  par  value  of  all  its  bonds,  stocks 
and  other  liabilities. 

What  should  be  the  principle  governing  each 


Constitutional  Amendment  Sought    335 

one  of  these  cases?  It  is  not  the  purpose  of  this 
scheme  that  it  shall  work  the  repudiation,  or 
change  in  value,  of  any  legitimate  existing  obliga- 
tion of  any  railway  company.  While  the  purpose 
is  that  all  existing  securities  shall  be  extinguished, 
and  a  uniform  security  take  their  place,  and  that 
such  uniform  security  shall  have  the  same  basis 
of  income,  it  does  not  follow  that  any  existing 
legitimate  obligation  shall  be  repudiated. 

For  example,  there  are  existing  railway  bonds 
bearing  varying  rates  of  interest,  from  as  low  as 
3%  to  as  high  as  8%  maturing  at  fixed  dates. 
All  these  securities  are  convertible  according  to 
certain  well  established  formulae  into  a  security 
bearing  a  common  rate  of  interest.  And  so  long 
as  the  aggregate  of  securities  issued  did  not  exceed 
the  value  of  the  property  pledged  as  security, 
it  could  make  no  difference  either  to  the  public 
or  the  holders  of  such  securities  whether  they 
were  continued  until  their  respective  maturities 
at  their  existing  rates,  or  were  converted  into 
uniform  security  bearing  a  uniform  rate. 

Perhaps  this  might  be  made  clearer  by  a  state- 
ment of  facts  concerning  the  interest-bearing 
debts  of  the  railways.  Of  these  about  21%  bear 
interest  at  from  3%  to  4%;  50%  from  4%  to  5%; 
15%  at  from  5%  to  6%;  7%  at  from  6%  to  7%; 
while  only  about  2  %  bear  interest  at  rates  running 
from  7  %  to  8%.  There  is  no  principle  of  justice 
requiring  that  the  holders  of  low  interest  bearing 


336  An  American  Transportation  System 

securities  should  be  paid  a  higher  rate  during 
the  life  of  their  securities,  nor  is  there  any  principle 
of  fair  dealing  which  should  permit  the  new  organi- 
zation to  repudiate  the  payment  of  high  interest 
during  the  life  of  the  securities  bearing  such  high 
rates,  provided  the  securities  are  themselves 
untainted. 

Under  past  conditions  the  interest  bearing 
obligations  of  railways  and  their  stock  obligations 
have  stood  upon  very  different  bases,  and  a  court 
of  equity  in  marshaling  the  assets  of  a  railway 
would  not  fail  to  relegate  these  different  classes 
of  obligations  to  their  proper  respective  positions. 

In  the  first  case  above  stated,  the  corporate  assets 
and  liabilities  were  supposed  to  equal  each  other. 
If  the  value  of  a  road  just  equaled  the  amount 
of  all  its  liabilities,  it  would  not  concern  the  public 
as  to  the  character  of  these  liabilities,  nor  could 
it  be  a  matter  of  any  interest  to  the  holders  of 
different  orders  of  liabilities  at  the  present  time, 
that  securities  uniform  in  character  are  issued 
to  all  of  the  roads'  creditors.  For  every  dollar 
of  the  new  securities  would  be  superior  in  value 
to  the  very  best  of  the  old. 

Let  us  now  look  into  the  second  case  wherein 
the  value  of  the  railway's  property  is  supposed 
to  be  greater  than  the  bond  and  stock  obligations. 
Here  it  is  obvious  that  the  bondholders  and  stock- 
holders stand  upon  a  different  footing.  The 
value  of  the  railway's  property,  over  and  above 


Constitutional  Amendment  Sought   337 

the  amount  of  its  debts,  belongs  to  the  stockholders 
in  any  event,  and  if  that  value  were  greater  than 
the  par  value  of  the  stock,  then,  if  an  attempt 
were  made  to  make  all  securities  uniform  and 
entitled  to  the  same  income,  it  is  obvious  that 
the  stockholders  in  such  a  company  would  be  en- 
titled to  have  the  excess  of  the  company's  assets 
in  the  form  of  additional  stock.  Suppose  a  rail- 
way to  have  cost  and  to  be  capitalized  at  two 
million  dollars,  represented  by  one  million  of 
bonded  debt  and  one  million  of  stocks.  Suppose 
that  under  state  regulation  of  rates  making  them 
"reasonable,"  such  a  company  has  been  able  to 
earn  and  pay  dividends  at  the  rate  of  10%. 
With  money  valued  at  5%,  is  it  not  clear  that 
such  a  road  is  worth  three  million  dollars?  Under 
such  circumstances  could  there  be  any  justice  in 
compelling  the  shareholders  to  accept  in  lieu 
of  their  shares  one  million  of   new  stock  paying 

But  here  certain  very  awkward  circumstances 
may  present  themselves.  Under  railroading  as  it 
has  been  carried  on,  certain  railways  have  been 
able  to  exhibit  fictitious  earning  capacities.  One 
or  more  roads  may  be  milked  to  furnish  cream 
for  a  third  road.  This  is  a  common  and  most 
uneconomical  practice.  It  gives  the  cream-receiv- 
ing road  an  abnormally  high  financial  standing, 
and  of  course  an  abnormally  low  standing  to  the 
milked  roads.     It  was  shown  in  a  former  part  of 


338  An  American  Transportation  System 

this  book,  how  a  very  small  minority  of  the  cap- 
ital of  even  a  great  system  may  control  the 
system.  When  such  a  small  minority  of  the 
controlling  capital  stock  falls  into  the  possession 
of  another  railway  corporation,  there  is  nothing 
easier  than  to  work  one  system  for  the  benefit 
of  the  other. 

This  is  one  of  the  processes  by  which  some  of 
our  great  trunk  lines  are  now  being  built  up. 
This  is  called  able  financiering  and  shrewd  rail- 
roading. As  a  matter  of  fact,  it  is  nothing  more 
than  an  exhibition  of  the  brute  power  of  money. 
A  man  with  the  brains  of  a  crossed  bulldog  and 
wolf,  could  do  it  as  well  as  it  is  being  done.  The 
principal  requirement  is  a  brain  utterly  callous 
to  the  rights  of  security  holders  in  the  milked 
road.  The  court  would  have  to  be  on  guard 
against  cases  of  this  kind,  where  roads  have 
shown  fictitious  earning  power,  solely  by  reason 
of  their  capacity  to  divert  traffic  to  them  and 
out  of  its  natural  channels. 

The  third  case  supposes  roads  having  capitali- 
zations in  excess  of  assets.  That  there  are  such 
roads  is  obvious,  from  the  fact  that  the  market 
value  of  the  securities  of  more  than  50%  of  our 
railway  mileage  is  below  par,  and  that  in  many 
cases  their  stocks  are  regarded  as  nothing  but  a 
gamble. 

The  first  principle  governing  the  distribution  of 
new  securities  to  replace  old  ones  in  the  roads 


Constitutional  Amendment  Sought    339 

falling  in  the  third  class,  should  be,  that  in  no  case 
should  the  aggregate  of  the  new  securities  be 
issued  in  excess  of  the  actual  value  of  the  roads. 
It  is  in  the  application  of  this  principle  that  some 
injustice  might  be  worked.  But  the  question 
after  all  is  simply  this :  whether  a  few  supposedly 
innocent  persons  should  be  injured,  or  whether 
the  whole  American  public,  now  and  for  all  time 
to  come,  should  suffer  injustice?  It  must  not 
be  forgotten,  that  the  stocks  of  railways  have 
been  in  the  past  very  largely  a  gamble,  and  if  peo- 
ple choose  to  gamble  in  that  class  of  securities, 
they  cannot  complain  that  the  government  in  the 
exercise  of  its  right  to  regulate  rates  according 
to  the  value  of  the  road,  should  have  made  their 
gamble  unprofitable.  A  different  principle  applies 
to  them,  than  to  the  class  of  people  who  have 
actually  furnished  the  money  which  went  into 
and  built  the  roads,  and  which  is  now  largely 
represented  by  bonds. 

Now,  it  has  been  the  main  justification  for  stock 
watering,  that  the  watered  stocks  represent  no 
great  value  anyway.  If  they  do  not  do  anybody 
any  good,  they  do  not  do  anybody  any  harm. 
If  that  be  true,  then  my  reply  is,  that  it  could  make 
no  difference  to  the  stockholder  holding  five  shares 
of  stock  the  par  value  of  which  is  $100,  yet  which 
is  selling  at  $20.00  per  share,  whether  he  kept 
the  five  or  had  the  five  exchanged  for  one  share 
of  stock  worth  $100.00.     But  this  change  would 


34o  An  American  Transportation  System 

enormously  cut  down  the  capitalization  of  the 
roads  as  a  whole,  and  that,  I  apprehend,  is  about 
what  the  American  people  are  entitled  to.  In- 
stead of  waiting  until  the  growth  of  the  country 
shall  build  these  stocks  up  to  par  value  and  a 
dividend  paying  basis,  they  have  a  right  to  shear 
them  off  now,  and  that  should  be  done. 

Generally  speaking,  therefore,  in  dealing  with 
the  three  classes  of  roads,  the  court  should  give 
priority  to  such  obligations  as  represent  money 
actually  paid  to  the  company,  and  as  to  the  rest 
of  the  obligations,  they  should  be  cut  down  to 
just  whatever  the  actual  assets  of  the  company 
may  be  over  and  above  liabilities,  and  that  amount 
being  found,  should  be  distributed  pro  rata  among 
the  holders  of  the  stock. 

III.    The  Transportation  Corporation 

How  the  corporation  should  be  created 

All  existing  facilities  of  transportation  having 
been  inventoried  and  appraised,  the  respective 
rights  of  all  owners  in  existing  corporations  having 
been  determined  and  certificates  of  ownership 
issued  to  them,  the  next  step  is  the  organization 
of  these  certificate  holders  into  a  body  corporate 
to  carry  on  the  transportation  business  of  this 
country.  How  should  such  a  corporation  be  cre- 
ated? It  has  been  herein  suggested  that  the 
corporation    be   created    by    the    constitutional 


Constitutional  Amendment  Sought   341 

amendment  itself.  The  proposed  amendment 
provides  that — the  above  things  being  done — 
the  holders  of  such  certificates  of  ownership,  their 
assigns  and  successors,  shall  thereupon  be  a 
body  corporate,  etc.  Thus  the  corporation  is 
brought  into  being  by  the  supreme  legislative 
act  of  the  people. 

It  may  indeed  seem  strange,  that  this  corpora- 
tion should  be  brought  into  existence  by  an 
amendment  to  the  constitution  of.  the  United 
States.  At  first  blush  such  a  proposal  seems 
quite  ludicrous.  You  say,  "What!  the  staid, 
old,  venerated  constitution  used  to  create  a  mere 
vulgar  corporation!  Ridiculous!"  And  those 
who  are  facetiously  inclined  will  add,  "why  not 
at  the  same  time  create  sundry  corporations  by 
constitutional  amendments,  one  to  manufacture 
steel,  another  to  make  electricity,  another  to  do 
banking,  etc."  To  all  of  which  I  answer,  that 
transportation  is  unique  in  the  industrial  affairs 
of  man.  This  is  shown  by  the  fact  that  nearly 
all  governments  of  the  world  regard  transportation 
as  essentially  a  function  of  sovereignty,  as,  indeed, 
highways  of  communication  have  been  from  time 
immemorial.  Even  our  own  constitution  makers 
hinted  at  it,  in  conferring  upon  the  federal  au- 
thority the  power  to  establish  post-roads.  If  I 
mistake  not  England  is  rapidly  approaching  gov- 
ernment ownership  of  railways.  If  the  census  of 
the  United  States  were  taken  to-day  it  is  not 


342  An  American  Transportation  System 

unlikely  that  there  would  be  found  millions  of 
people  who  favor  government  ownership  and 
operation  of  railways  in  this  country.  However 
that  may  be,  there  is  one  subject  upon  which  all 
are  agreed — the  fact  that  railways  perform  an 
essentially  public  function.  So  do  certain  other 
quasi  public  industries,  but  there  is  none  whose 
function  is  so  distinctively  and  so  universally 
public  as  the  agencies  which  conduct  transporta- 
tion. 

But  there  are  sundry  other  reasons  in  addition 
to  the  public  character  of  the  railway  industry, 
which  lead  me  to  the  conclusion  that  it  is  not 
beneath  the  dignity  of  the  federal  constitution 
to  take  cognizance  of  it.  The  corporation  which 
would  be  created  to  do  the  transportation  service 
of  this  country,  would  have  to  do  with  a  sixth 
part  of  all  the  wealth  of  the  United  States;  upon 
it  would  be  dependent  for  support  a  twelfth  part 
of  all  the  people  of  this  country,  and  the  corpora- 
tion itself  would  be  the  most  vitally  important 
industry,  serving  the  welfare  of  the  whole  people. 
But,  still,  these  are  not  the  principal  reasons 
why  I  think  the  corporation  should  be  created 
by  the  constitution  itself.  The  overwhelmingly 
important  reason  is,  because  the  corporation  and 
the  service  it  performs  should  be  forever  removed 
from  American  politics,  so  that  the  corporation 
cannot  use  the  government,  and  the  politicians 
cannot    use    the    corporation    for    their    private 


Constitutional  Amendment  Sought   343 

purposes.     How,  then,  does  the  matter  stand? 

If  we  are  ever  to  be  free  from  the  unprofitable 
confusion  which  prevails,  by  reason  of  the  railways 
being  half  under  the  control  of  congress  and  half 
under  the  control  of  the  state  legislatures,  with  the 
result  of  no  control,  but  only  confusion  every- 
where, that  result  can  be  accomplished  only  by 
an  amendment  to  the  federal  constitution.  For 
while  congress  has  the  undoubted  power  to  charter 
corporations  to  engage  in  interstate  trade,  it 
undoubtedly  has  not  the  power  to  charter  cor- 
porations to  engage  in  intrastate  trade.  Since 
every  railway  corporation  is  engaged  in  both 
interstate  and  intrastate  trade,  it  therefore  follows 
that  if  congress  undertook  to  charter  railway 
corporations  to  engage  in  interstate  trade,  each 
corporation  would  have  to  be,  so  to  speak  two 
corporations  or  a  double  corporation;  which  has 
something  absurd  about  it,  not  to  mention  the 
fact  that  instead  of  removing  the  conflict  and 
confusion  which  now  exist  it  would  but  serve 
to  worse  confound  them.  There  is  no  way  out 
of  this  muddle,  except  a  constitutional  amend- 
ment making  transportation  essentially  a  federal 
matter. 

We,  therefore,  have  the  choice  between  creating 
a  transportation  corporation  by  a  constitutional 
amendment,  and  conferring  on  congress,  by  a 
constitutional  amendment,  the  power  to  charter 
such  a  corporation,  with  the  incident  of  congres- 


344  An  American  Transportation  System 

sional  power  over  the  whole  matter  of  transporta- 
tion interstate  and  intrastate.  In  my  opinion  any 
objection  to  the  use  of  the  constitution  for  the 
purpose  of  creating  such  a  corporation,  must  give 
way  before  the  immeasurable  harm  which  would 
follow  from  conferring  such  authority  upon  con- 
gress. If  an  amendment  were  adopted  which, 
to  the  existing  power  of  congress  to  regulate 
commerce  among  the  states,  added  also  the  power 
to  regulate  commerce  throughout  the  United 
States  the  states  would  at  one  blow  be  practically 
destroyed,  because  nearly  everything  we  do  relates 
directly  or  indirectly  to  commerce.  Even  if  the 
amendment  extended  the  power  to  congress  to 
the  regulation  of  transportation  intrastate  as  well 
as  interstate,  it  would  enormously  increase  the 
power  of  the  central  government  in  all  its  branches 
but  especially  in  the  legislative  branch.  Congress 
would  then  have  the  power  to  deal  with  the  entire 
transportation  problem  as  it  saw  fit  or  not  to  deal 
with  it  at  all.  Thus  the  railroad  question,  instead 
of  being  eliminated  from  politics,  would  be  em- 
balmed in  politics  for  all  time.  We  would  have 
such  an  era  of  political  corrupution  as  we  have 
never  supposed  possible.  If,  on  the  other  hand, 
the  people  by  their  supreme  legislative  act  created 
the  corporation  and  denned  its  rights,  duties  and 
obligations,  there  would  be  no  incentive  for  the 
corporation  to  appeal  to  congress  for  privileges, 
nor    any    possibility    for    politicians    to  thrive 


Constitutional  Amendment  Sought    345 

by  the  threat,  or  enactment,    of    vicious    legis- 
lation. 

IV.    The    Business   of   the    Transportation 
Corporation 

Dissevering   transportation   from    other    industries 

After  the  Supreme  Court,  or  whatever  tribunal 
should  be  given  jurisdiction  over  the  subject,  had 
inventoried  and  appraised  the  existing  transporta- 
tion facilities,  marshaled  the  assets  thereof  and 
caused  its  commissioner  to  issue  to  the  respective 
owners  of  securities  certificates  of  such  ownership; 
its  work  would  be  finished.  For  by  the  supreme 
legislative  act  of  the  people  the  holders  of  these 
certificates  constitute  a  body  corporate.  What 
a  corporation  is,  is  well  known,  and  this  corpora- 
tion would  differ  from  other  corporations  in  no 
respect,  except  as  provided  by  the  constitution 
itself.  That  instrument  defines  the  life  of  the 
corporation  to  be  "forever";  that  is,  until  the 
people  by  their  like  supreme  legislative  act 
terminated  its  existence.  Likewise  the  instru- 
ment of  its  creation  defines  and  confines  the 
business  of  the  corporation,  "exclusively  to 
transport  persons,  commodities  and  messages 
within  the  United  States  and  between  the  ports 
thereof."  The  instrumentalities  which  are  thus 
brought  together  under  one  control,  are  such  as 
are  at  present  engaged  in  the  transportation  of 


346  An  American  Transportation  System 

persons,  commodities  or  messages,  except  such 
as  are  exclusively  urban  and  such  other  as  congress 
might  exempt  from  the  operation  of  the  amendment. 

The  purpose  of  this  exception  is  obvious.  There 
are  now,  and  always  will  be,  certain  kinds  of 
transportation  which  are  not  of  a  sufficiently 
public  nature  to  make  it  desirable  that  they 
should  be  brought  into  the  list  of  transportation 
facilities  of  a  distinctly  public  nature.  There  are 
not  a  few  railways  which  are  quite  private  in 
their  nature,  and  there  are  many  kinds  of  small 
craft  likewise  engaged  in  private  ventures.  Also, 
there  may  be  parts  of  the  country  the  people 
whereof  might  think  themselves  not  satisfied 
with  the  facilities  provided  them  by  the  action 
herein  contemplated.  Likewise,  it  might  be 
considered  desirable  to  exempt  certain  kinds  of 
communication,  as  wireless  telegraphy,  etc.  The 
main  purpose  is  to  bring  under  conjoint  ownership 
and  operation  the  chief  facilities  of  transportation 
as  we  understand  them  to-day,  and  therefore  a 
residuum  of  authority  should  be  left  in  congress 
to  exercise  its  discretion  as  to  such  as  should  be 
excepted.  It  is  hardly  likely  that  this  would  be 
the  subject  of  abuse. 

If  it  be  true  that  no  man  can  serve  two  masters, 
it  is  equally  true  that  no  transportation  company 
can  serve  the  public  and  itself  at  the  same  time. 
It  cannot  be  engaged  in  a  business  in  which  it 
comes   into   competition  with   other   producers. 


Constitutional  Amendment  Sought   347 

If  it  does,  it  is  but  human  nature  to  serve  itself 
cheapest,  and  if  not  cheapest,  then  best,  and  if 
not  best,  then,  at  least,  first.  As  the  very  soul 
of  the  transportation  business  is  absolute  impar- 
tiality to  all  its  patrons,  it  follows  that  it  cannot 
engage  in  any  other  business  whatsoever  except 
transportation  and,  of  course,  the  incidents 
thereof. 

Unification  of  rail  and  water  transportation 

Scattered  through  this  book  may  be  found 
sundry  paragraphs  on  the  subject  of  destructive 
competition  among  corporations  engaged  in  the 
transportation  business;  the  origin  thereof;  the 
abuses  to  which  it  has  given  rise;  the  means  which 
the  companies  have  taken  to  abolish  it;  the  laws 
of  congress  and  the  states  to  force  it;  and  the 
final  result — the  virtual  amalgamation  of  the 
roads. 

Many  there  are  who  see  clearly  the  impossibility 
of  competition,  in  its  ordinary  sense,  among 
railroads,  who  see  equally  clearly  the  ultimate 
union,  in  some  form,  of  all  the  facilities  of  land 
transportation;  yet  who  will  be  shocked  by  the 
suggestion  that  it  is  quite  as  important  to  unify 
and  harmonize  water  and  land  transportation 
as  it  is  the  latter.  Doubtless  one  of  the  main 
incentives  to  the  building  of  the  Panama  Canal 
is   that   of   maintaining   active   and    continuous 


348  An  American  Transportation  System 

competition  between  the  Atlantic-Pacific  water 
route  and  the  American  trans-continental  rail- 
ways. Doubtless,  too,  the  only  reason  for  the 
present  agitation  for  the  re-opening  of  all  the 
rivers  of  the  country  to  navigation,  and  for  the 
construction  of  a  grand  system  of  canals,  is  that 
such  improvements  will  perpetuate  the  ancient 
quarrel  between  water  and  land  transportation. 
There  are  those  whose  hostility  to  the  railways 
is  so  pronounced,  that  they  would  not  hesitate 
to  bring  to  bear  upon  them  for  their  destruction, 
the  power,  wealth  and  resources  of  the  United 
States.  In  all  this  the  conception  is  ever  present 
and  predominant,  that  the  only  competent  regula- 
tive force  to  be  brought  to  bear  upon  the  industries 
of  the  world  is  competition.  This  is  a  venerable 
and  venerated  idea,  and  one  which  has  so  com- 
pletely occupied  the  field  of  thought  that  its 
complementary  idea  has  been  almost  banished. 
Many  times  have  students  as  well  as  practical 
workers,  pointed  out  the  limitations  of  this  happy 
plan  for  regulating  the  industrial  affairs  of  man. 
Many  times  have  they  shown  that  it  is  applicable 
only  within  narrow  bounds  to  industries  having 
large  fixed  charges.  Yet  so  justly  distrustful 
are  the  people  of  monopolies  resulting  from  the 
elimination  of  competition,  that  they  see  no 
way  or  hope  of  controlling  combined  industries 
except  by  their  absolute  prohibition  by  law.  I 
cannot  hope  to  add  anything  to  the  reasoning 


Constitutional  Amendment  Sought    349 

of  those  who  advocate  the  necessity  of  combina- 
tions to  regulate  the  prices  at  which  certain  in- 
dustries should  sell  their  products;  nor  do  I  fail 
to  realize  the  baneful  influence  of  monopolies. 
My  purpose  is  to  do  what  I  can  to  reach  a  higher 
view  point — a  point  from  which  we  may  be  able 
to  see  our  transportation  system  as  the  people's 
greatest  friend  and  not,  as  at  present,  their  enemy 
to  be  crippled  or  destroyed  by  the  hands  it  should 
most  help. 

If  transportation  is  to  be  a  monopoly,  as,  in  the 
nature  of  things,  it  must  be,  then  make  it  a  legal 
monopoly,  not  an  outlaw.  Support  it  as  becomes 
its  dignity  and  in  order  that  it  may  become  in  the 
highest  degree  helpful,  and  then  demand  of  it 
implicit  obedience  to  the  law  which  created  it. 
Happily,  we  are  in  a  much  better  position  to  do 
this  as  to  our  transportation  system,  than  as  to 
other  industries;  for  already  the  public  mind  is 
educated  to  regard  it  as  a  semi-public,  if  not  a 
public  instrumentality,  and  the  system  itself  has 
bowed  to  that  view  of  its  existence.  Nothing 
then  remains  but  to  devise  the  means  by  which 
it  may  become  the  helpful  friend  and  servant  of 
all. 

But  no  half  way  means  will  suffice.  No  good 
can  come  from  harmonizing  the  relations  between 
the  facilities  of  land  transportation  while  leaving 
them  in  open  hostilities  with  another  great  servant 
of  the  people — water  transportation.     Least  of  all 


350  An  American  Transportation  System 

can  the  nation  serve  itself  by  building  up  a  great 
system  of  water  transportation  to  engage  in  an 
inevitable  war  with  land  transportation.  For  one 
of  two  things  must  result ;  these  two  systems  will 
combine  into  an  uncontrolled  monopoly  or  they 
will  fight  till  the  weaker  dies.  If  laws  be  made 
prohibiting  their  combination,  then  prepare  for 
universal  bankruptcy.  From  a  financial  stand- 
point, this  nation  could  better  afford  to  have  a 
foreign  war.  But  the  pity  of  it  is  that  an  intelli- 
gent nation  should  set  its  two  great  servants 
to  battle,  and  be  itself  financially  crippled  as  the 
outcome  of  the  struggle. 

From  every  side,  in  the  books  of  learned  writers, 
in  the  cases  before  courts  and  commissions,  in 
investigations  before  legislative  bodies;  do  we 
hear  the  excuse  for  wrong  railway  practices  that 
the  railways  have  to  do  them  because  they  have 
to  meet,  or  are  threatened  with,  water  competition. 
If  the  people  to  the  east  of  the  Pacific  seaports, 
complain  that  they  are  compelled  to  pay  through 
rates  to  those  ports  and  local  rates  back  to  their 
towns;  the  justification  of  the  railroads  is  that 
they  have  to  meet  water  competition.  If  the 
people  of  the  South  complain  of  outrageous  dis- 
crimination nearly  everywhere,  the  railway's 
excuse  is  that  it  has  to  adjust  its  rates  to  meet 
water  competition.  If  Chicago  complains  that 
the  railway  gives  Eastern  merchants  better  rates 
into  certain  Southern  territory  than  it  receives 


Constitutional  Amendment  Sought    351 

while  much  nearer,  the  same  old  justification  comes 
to  the  surface — water  competition.  So  when  St. 
Louis  bitterly  complains  that  it  is  robbed  of  the 
advantages  of  its  geographical  position  by  low 
railroad  rates  from  Eastern  cities,  the  answer  is, — 
water  competition.  And  now  note,  that  competi- 
tion between  land  and  water  transportation  is 
never  made  the  excuse  for  any  good  thing;  it  is 
always  the  excuse  for  the  defense  of  a  bad  practice 
and  a  justification  for  its  continuance.  No  one 
ever  complains  that  water  carriage  is  not  a  good 
thing  in  itself ;  the  trouble  is  that  it  is  always  made 
the  apology  for  injustice  and  discrimination  on 
the  part  of  the  railways.  Above  all  things  my 
contention  is,  not  that  the  benefit  of  water  trans- 
portation be  taken  away,  but  that  its  existence 
shall  no  longer  be  the  excuse  for  the  perpetuation 
of  railway  outrages.  This  can  be)  accomplished 
in  no  way  except  by  the  union  of  rail  and  water 
carriage  under  one  control.  This  we  dare  not 
permit  uncontrolled,  by  reason  of  our  just  fear 
of  the  transportation  monopoly  which  would 
result. 

What  would  be  the  effect  of  union  of  rail  and 
water  transportation  under  the  control  outlined 
in  this  book?  We  are  so  unaccustomed  to  think 
of  all  means  of  transportation  being  under  one 
control  and  non-competitive,  that  at  first  the 
question  seems  difficult  of  solution.  If,  however, 
we  alter    the    question   and   ask:    Under   given 


352  An  American  Transportation  System 

conditions  by  which  kind  of  transportation  can  the 
people  be  best  served,  the  answer  seems  naturally 
enough :  If  by  water,  then  it  should  be  by  water ; 
if  by  rail,  then  it  should  be  by  rail;  if  by  both 
water  and  rail,  then  it  should  be  by  both. 

The  persistence  of  water  carriage,  notwith- 
standing the  drastic  competition  to  which  it  has 
been  subjected  by  the  roads,  which  often  carry 
the  same  kind  of  freight  at  a  loss,  is  conclusive 
evidence  of  the  fact  that  there  are  certain  kinds 
of  freight  that  boats  can  carry  more  economically 
than  the  railways.  Where  water  transportation 
exists,  this  sort  of  freight  naturally  belongs  to  it. 
It  consists  of  certain  kinds  of  heavy  freight  not 
seriously  affected  by  water  carriage,  and  where 
speedy  delivery  is  not  important.  The  shipper 
should  have  the  right  to  have  that  sort  of  freight 
carried  by  water  at  a  reasonable  profit  to  the 
carrier.  If  the  shipper  desires  to  send  it  by  rail, 
he  should  be  required  to  pay  a  higher  rate.  This 
would  doubtless  cut  the  railways  out  of  some 
business.  But  it  must  be  remembered  that  under 
the  system  herein  outlined,  all  profits  from  all 
sources  of  transportation  go  into  the  same  treas- 
ury; so  that  the  loss  on  one  side  would  be  made 
up  by  the  profits  on  the  other.  It  is  the  general 
system  which  is  to  be  made  to  show  a  profit  and 
not  of  necessity  each  particular  part  of  it. 

If  the  seaports  should  complain  that  the  effect 
would  be  to  make  them  pay  higher  rates  by  rail 


Constitutional  Amendment  Sought   353 

the  answer  is,  that  they  should  be  compelled 
to  pay  the  same  rates  by  rail  that  the  rest  of  the 
country  does.  They  can  not  have  added  to  their 
natural  sea  advantages — which  they  retain — 
artificial  advantages,  which  they  have  had  at  the 
expense  of  interior  points.  It  is  time  the  water 
towns  contributed  their  just  share  to  the  support 
of  the  country's  transportation  system. 

Against  this  plea  for  harmonious  relations  be- 
tween land  and  water  transportation,  the  only 
answers  are  the  fear  of  the  monopoly  which  would 
result,  and  the  outrage  which  would  be  imposed 
upon  American  citizens  by  depriving  them  of  their 
God-given  right  to  engage  in  the  coastwise,  lake 
and  river  carrying  business.  But  are  you  so 
sure  that  the  very  monopoly  which  you  so  much 
fear,  and  the  substantial  deprivation  of  American 
citizens  of  their  right  to  engage  in  this  occupation 
are  not  now  accomplished  facts  ?  Do  not  imagine 
for  one  moment  that  the  only  weapon  with  which 
the  railway  has  fought  water  transportation  to  a 
standstill  is  low  railway  rates  between  places  where 
water  carriage  exists.  On  the  contrary  the  rail- 
way has  chiefly  fought  and  largely  conquered 
water  transportation  by  engaging  in  it.  From 
Boston  to  New  York,  from  New  York  to  Savan- 
nah, to  New  Orleans,  to  San  Francisco,  to  Puget 
Sound,  coastwise  transportation  is  controlled  by 
the  railways.  And  wherever  there  is  a  navi- 
gable river  of  sufficient  consequence  to  seriously 

*3 


354  An  American  Transportation  System 

interfere  with  the  railway  monopoly  of  traffic, 
water  transportation  on  that  river  is  controlled 
by  the  railways. 

Look  at  it  broadly  and  ask  yourself  if  it  is  reason- 
able to  suppose,  that  the  twelve  to  eighteen  billion 
of  dollars  invested  in  railways  would  be  likely  to 
lay  down  its  hand  before  the  puny  investments 
in  water  carriage? 

"But,"  you  say,  "if  water  transportation  is 
controlled  by  the  railways  then  how  can  there 
be  competition  between  them?  Why  do  not  the 
railways  raise  the  price  of  water  carriage  so  that 
it  is  no  longer  a  competitor  with  carriage  by  rail?" 
And  the  answer  is:  Because  water  carriage, 
where  there  is  found  fifteen  feet  or  more  of  water, 
is  so  much  cheaper  than  railway  carriage  that 
the  railways  engaged  in  water  carriage  cannot 
raise  the  rates  without  bringing  upon  themselves 
competition  by  independent  carriers  by  water. 
They  put  down  the  price  of  water  carriage  them- 
selves to  drive  out  the  independent  carrier  or 
force  him  to  railway  terms,  and  they  cannot  put 
the  price  up  again  without  surely  inviting  a  renewal 
of  the  competition.  Thus  they  have  established 
a  practical  monopoly  of  water  carriage,  and  at 
the  same  time,  and  by  the  same  act,  have  practi- 
cally banished  the  independent  water  carrier  from 
the  water.  Moreover  they  have  made  the  threat 
of  water  competition  the  excuse  for  a  score  of  bad 
practices,  such  as  have  been  already  set  forth. 


Constitutional  Amendment  Sought    355 

If,  therefore,  the  only  objections  to  the  consoli- 
dation of  land  and  water  transportation  are,  that 
a  monopoly  of  transportation  would  thereby  be 
created  and  that  the  right  of  our  people  to  engage 
in  coast  and  inland  navigation  would  be  limited, 
then  the  objections  are  answered  by  the  facts, 
that  such  a  monopoly  exists  to-day  and  that  the 
rights  claimed  have  been  practically  destroyed  by 
the  existing  monopoly. 

What  a  world  of  difference  it  makes  to  people 
how  their  rights  are  destroyed !  They  sit  supinely 
year  after  year  seeing  their  individuality  con- 
tinuously abridged  by  the  growth  of  industrial 
corporations,  yet  they  howl  themselves  hoarse  in 
denunciation  of  a  natural  law,  the  operation  of 
which  they  are  as  powerless  to  stay  as  they  are 
the  movements  of  the  tides.  The  simple  fact  is 
that  monopoly  is  the  perfectly  natural — or  shall 
I  say  unnatural — result  of  successful  business 
methods.  Just  as  the  human  race  has  evolved 
by  the  survival  of  the  fittest  with  the  consequent 
elimination  of  the  unfit,  so  industries  have  grown 
and  developed  by  the  survival  of  such  enter- 
prises as  adopted  the  business  methods  best 
calculated  to  accomplish  those  ends,  with  the 
elimination  of  such  as  do  not  adopt  them.  And 
this  inevitably  leads  to  monopoly.  The  employ- 
ment of  successful  business  methods  leads  cer- 
tainly to  the  absolute  control  of  the  industry 
upon  which  they  are  brought  to  bear.     So  long 


356  An  American  Transportation  System 

as  industries  were  carried  on  by  individuals,  the 
tendency  to  monopoly  was  checked  by  the  death 
of  the  individual,  but  with  the  introduction  of 
the  deathless  corporation  that  check  has  ceased 
to  operate.  The  continuance  of  the  petroleum 
monopoly  in  the  United  States  is  not  in  the  slight- 
est degree  dependent  upon  the  life  of  any  of  its 
heads.  Its  continuance  is  embalmed  in  its  bus- 
iness methods — the  most  perfect  of  their  kind  in 
the  industrial  world. 

Seeing  then  that  monopoly  is  the  natural  result 
of  the  continual  employment  of  successful  business 
methods,  what  is  the  wrong  in  it?  Surely  it  is 
not  the  employment  of  the  successful  business 
methods  which  is  wrong.  The  wrong  consists 
in  the  simple  fact  that  the  attained,  incorporated, 
industrial  monopoly  is  a  conscienceless  inhuman 
hog.  It  is  the  natural  human  hog  plus  the  corpora- 
tion, which  makes  it  an  inhuman  hog.  And  yet 
this  is  exactly  the  thing  which  is  to  control  the 
industrial  affairs  of  the  world  in  the  future. 

Strange  to  say,  it  was  from  a  Standard  Oil 
man  that  I  heard  the  best  remedy  I  have  ever 
heard  for  the  evil  of  an  industrial  monopoly. 
Premising  his  conclusion  by  the  remark  that 
the  monopoly  is  the  inevitable  consequence  of  the 
employment  of  economic  methods,  he  said: 
"The  only  remedy  against  the  exorbitant  prices 
of  an  established  monopoly  is  for  the  state  to 
take  its  profits  by  taxation  above  a  reasonable 


Constitutional  Amendment  Sought   357 

percentage,  and  redistribute  them  among  the  peo- 
ple as  expenses  of  government."  Whether  or 
not  this  is  the  correct  solution  of  the  problem,  it 
points  strongly  to  the  fact  that  in  attempting  by- 
law to  prevent  the  existence  of  monopolies  we  have 
been  hammering  at  the  wrong  door.  We  cannot 
expect  to  kill  monopolies  unless  we  destroy  eco- 
nomic business  methods.  The  thing  to  do  is  to 
eliminate  their  capacity  for  working  evil.  This 
may  be  done  mainly  in  two  ways :  by  limitation  of 
their  capitalization  to  actual  values  and  by  a  tax- 
ation upon  excessive  profits.  The  railway  being 
a  semi-public  industry  we  accomplish  the  second 
end  by  a  limitation  of  its  charges. 

Thus  it  is  not  the  transportation  monopoly 
resulting  from  the  consolidation  of  transportation 
facilities  which  we  need  to  fear,  for  with  the 
attainment  of  the  monopoly  will  come  economic 
methods.  What  we  need  fear  is,  that  the  accom- 
plished development  of  the  transportation  mo- 
nopoly will  be  followed  by  certain  abuses  which 
characterize  monopolies  in  general.  The  remain- 
der of  this  book  is  largely  given  over  to  the  sugges- 
tion of  means  whereby  the  good  of  the  monopoly 
may  be  retained  and  the  harm  prevented. 

V.    The  Board  of  Directors 

Ownership  representation 

The  corporation  created  as  herein  set  forth,  and 


358  An  American  Transportation  System 

engaged  in  carrying  on  the  transportation  serv- 
ice of  the  country,  would  be  managed  by  a  board 
of  directors  like  any  other  corporation.  But 
there  would  be  a  wide  and  all-important  difference 
between  it  and  the  railway  corporations  which 
we  now  have.  At  present  they  are  managed 
by  directors  elected  by,  at  most,  a  bare  majority 
of  the  voting  stock,  which,  in  practice,  is  nearly 
always  a  minority  of  the  total  stock  and  very 
often  a  small  minority,  while  only  from  three  to 
twenty  per  cent,  of  the  total  invested  capital  has 
any  voice  whatever  in  the  management  of  the 
investment.  Under  the  proposed  corporation, 
every  dollar  of  invested  capital  would  be  evi- 
denced by  corporate  stock,  and  every  dollar  would 
have  with  every  other  dollar  an  equal  vote  in  the 
election  of  the  board  of  directors  whose  immedi- 
ate business  it  would  be  to  care  for  the  affairs 
of  the  corporation. 

It  may  as  well  at  once  be  admitted  and  for 
that  matter  alleged,  that  the  contemplated 
corporation  would  be  in  effect  a  mutual  society, 
the  sole  duties  of  the  directors  being  to  manage 
its  affairs  in  accordance  with  the  law.  If  objec- 
tion be  made  to  the  mutual  character  of  such  a 
corporation,  then,  I  ask,  what  in  the  contemplation 
of  the  law,  and  what  in  the  spirit  of  its  undertak- 
ing, is  any  corporation  except  a  mutual  society; 
the  managers  of  which,  in  strict  accordance  with 
the   law,   manage  the  corporate  business    solely 


Constitutional  Amendment  Sought   359 

in  the  interest  of  the  shareholders?  To  exhibit 
surprise  at  this  question  is  to  show  how  far  we  have 
drifted  away  from  conceptions  of  common  honesty 
in  our  expectations  concerning  the  managerial 
control  of  our  corporations.  So  accustomed  have 
we  grown  to  the  speculative  aspect  of  corporate 
operations — to  corporations  controlled  by  and 
in  the  interest  of  pools, — that  we  have  come  to 
look  upon  those  who  manage  their  affairs  as 
holders  of  positions  vesting  in  them  the  right  and 
privilege  to  make  profits  for  themselves,  not 
enjoyed  by,  and  often  at  the  expense  of,  stock- 
holders. To  imagine  the  existence  of  corporations 
in  which  directors  and  executive  committees  have 
no  interest  beyond  the  interests  they  are  appointed 
to  subserve  and  conserve,  is  to  stretch  the  imag- 
ination, indeed.  The  overwhelming  majority  of 
the  owners  of  railway  securities  to-day  can  only 
guess  what  the  next  move  of  their  boards  of 
directors  is  to  be,  and  gamble  on  it  and  its  results. 
If  you  do  not  believe  this,  go  with  stock  in  your 
hand  as  evidence  of  your  rights  as  a  stockholder 
to  the  managerial  powers  of  any  of  our  railways, 
and  seek  information  as  to  any  matter  whatsoever 
concerning  their  plans  to  be  made,  in  process  of 
making,  or  completely  made,  and  you  will  be 
regarded  as  an  impertinent  ass.  Remember  that 
the  demand  for  publicity  in  corporate  operations 
is  of  very  recent  date,  and  that  until  recently 
no  information  was  ever  given  out  except  just 


360  An  American  Transportation  System 

such  as  the  directorate  was  willing  should  be 
known.  And  now  note  further  that  the  excuse 
of  directors  withholding  information  from  stock- 
holders is,  that  their  competitors  may  not  know 
their  secrets ;  thus  making  competition  chargeable 
with  one  more  corporate  abuse. 

If  it  be  further  said  that  the  management  of  mu- 
tual societies  is  not  above  the  criticism  bestowed 
upon  the  ordinary  corporation,  that  the  direc- 
tors of  mutual  societies  also  use  their  offices  for 
their  personal  profit ;  the  answer  is  first,  that  it  is 
not  generally  true  and,  second,  if  it  were  it  is 
largely  the  fault  of  the  law.  The  law  should 
require  the  officers  of  all  mutual  societies  to  make 
frequent  full  and  detailed  reports  of  the  affairs 
of  their  corporations  to  a  court,  the  same  as 
executors,  administrators,  guardians  and  other 
trustees  are  required  to  make,  and  these  reports 
should  be  subject  to  challenge  by  any  interested 
party.  Such  reports  would  be  a  hundred  times 
more  effective  in  the  prevention  of  wrong  doing, 
than  the  cursory  examination  of  their  affairs  by  a 
political  administrative  appointee. 

The  objection  of  corporations  to  publicity  is 
largely  unjustified.  Let  the  private  individual 
keep  his  secrets,  or  tell  them  to  his  wife,  his  priest 
and  his  banker,  when  he  wants  to  borrow  money 
from  the  latter.  A  corporation  which  goes  into 
the  general  public  market  and  asks  the  public  to 
loan  it  money,  as  it  does  when  it  offers  its  securi- 


Constitutional  Amendment  Sought   361 

ties  for  sale,  can  have  no  secrets  which  that  public 
is  not  entitled  to  know.  By  inviting  the  public 
to  participate  in  its  enterprise,  it  has  assured  the 
public  that  it  neither  has  nor  will  have  any  secrets. 
Such  a  corporation,  so  managed,  I  would  have  the 
corporation  which  conducts  our  transportation, 
which  must  rely  upon  the  public  to  furnish  it  the 
means  for  its  support. 

The  duties  of  directors 

Let  us  begin  the  enumeration  of  the  duties  of 
the  directors  of  our  far  distant  corporation  by  a 
statement  of  some  of  the  "duties"  which  would 
not  fall  upon  them.  These  may  be  selected 
quite  at  random  from  among  the  "duties"  they 
now  perform. 

The  directors  would  not  loan  the  money  of 
their  stockholders  to  themselves,  with  or  without 
good  security. 

They  would  not  contribute  the  money  of  their 
stockholders  to  political  parties,  in  exchange  for 
protection  for  criminal  practices. 

They  would  not  use  the  money  of  their  stock- 
holders to  make  or  unmake  markets  for  the  benefit 
of  their  executive  officers. 

They  would  not  hold  back  the  declaration  of 
dividends  until  they  had  bought,  with  their  own 
or  their  stockholders'  money,  as  much  of  the  stock 
of  the  corporation  as  they  thought  they  could 


362  An  American  Transportation  System 

sell  to  the  public  on  the  rise  which  would  follow 
the  announcement  of  the  dividend. 

They  would  not  be  interested  in  construction, 
improvement  and  other  companies,  by  means  of 
which  they  could  contract  with  themselves  for 
all  work  done  for  the  corporation  and  materials 
furnished  to  it. 

They  would  not  borrow  money  with  which  to 
pay  unearned  dividends,  by  means  of  which  to 
boost  their  stocks. 

They  would  not  be  interested  in  banks,  or 
underwriting  syndicates,  to  whom  they  sell  the 
bonds  and  stocks  of  their  corporation  at  large 
discounts. 

They  would  not  declare  stock  dividends  and 
issue  watered  stock  to  themselves,  at  their  own 
sweet  will. 

These  are  some  of  the  duties  they  would  not 
perform.  In  short  they  would  not  make  the 
transportation  system  of  the  country  their  own 
private  plaything.  But  they  would  have  plenty 
to  do.  To  convert  the  entire  transportation  sys- 
tem of  the  United  States  into  one  harmoniously 
working  organism,  to  the  end  that  all  the  people 
might  be  served  impartially  and  economically 
and  to  the  best  advantage  possible,  would  call 
forth  the  highest  order  of  organizing  genius. 
No  man  lives  to  whom  that  undertaking  would 
not  be  an  honor.  If  the  directors  would  not  have 
the  power  to  wreck  old  roads  or  build  new  ones  to 


Constitutional  Amendment  Sought   363 

their  personal  advantage,  they  would  still  have 
the  duty  imposed  upon  them  to  devise  means 
whereby  the  existing  system  would  be  made 
safe  and  extended  to  meet  the  requirements  of 
the  country;  and  having  so  devised,  to  petition 
the  court  for  authority  to  put  their  plans  into 
execution. 

These  directors  would  have  the  receipt  and 
disbursement  of  two  or  three  times  the  total 
revenue  of  the  federal  government.  But  be  not 
alarmed  at  that.  The  same  power  rests  to-day 
in  a  thousand  or  so  boards  of  directors  scattered 
through  the  several  states,  and,  for  the  most 
part,  without  a  shred  of  control  over  them. 
Instead  of  having  to  watch  ten  thousand  possible 
rascals  you  would  have  to  look  after  only  ten. 
And  it  ought  to  be  the  law  that  any  official  of  a 
corporation  who  enters  into  any  contract,  or  has 
any  transaction,  on  behalf  of  his  corporation, 
from  which  he  does,  or  might,  obtain  a  financial 
advantage  for  himself,  should  be  guilty  of  a  crime. 
The  officers  of  corporations  should  no  more  be 
personally  interested  in  the  contracts  they  make 
for  their  corporations,  than  the  judge  on  the  bench 
in  the  suit  he  tries. 

But  of  course,  not  only  the  board  of  directors 
but  the  subordinate  officers  under  them  should, 
of  necessity,  be  vested  with  large  discretionary 
powers.  A  great  corporation  cannot  be  conducted 
on   the    bureaucracy    plan.      But    a    thousand 


3°4  An  American  Transportation  System 

questions  which  now  bother  those  engaged  in 
the  transportation  business  would  be  laid  away 
forever. 

If  rates  were  uniform  and  discrimination  of  all 
kinds  wiped  out,  a  large  percentage  of  railway 
work  would  be  rendered  unnecessary.  With  the 
change  of  the  railroad  from  a  speculation  to  an 
investment,  would,  of  necessity,  go  all  the  nefa- 
rious work  now  devoted  to  the  stock  exchange 
aspect  of  railway  corporations.  The  essential 
financial  duties  of  the  directors  and  their  aids 
would  consist  in  the  making  of  rates  so  that  the 
revenue  of  the  corporation  would  be  sufficient. 
Primarily,  this  duty  would  devolve  on  the  directors 
subject  to  the  disapproval  of  the  court  if  it  were 
not  performed  in  accordance  with  the  law. 

In  every  affair  of  this  life  trust  and  confidence 
must  be  lodged  somewhere.  No  scheme  was 
ever  yet  devised  which  would  prevent  one  who 
has  access  to  a  cash  box  robbing  it.  What  has 
been  here  proposed  has  nothing  much  to  do  with 
the  till-tapper.  It  attempts  to  dispose  of  the 
gentlemanly  thief, — the  man  who  under  the  dis- 
guise of  the  railway  trustee,  systematically  plun- 
ders his  corporation,  his  stockholders  and  the 
public. 

Would  individual  incentive  be  destroyed  t 

This  is  a  matter  of  very  great  importance. 
Surely  the  man  should  be  put  into  jail  who  would 


Constitutional  Amendment  Sought    365 

dare  suggest  anything  which  would  diminish  the 
American's  incentive  to  accumulate  dollars  for 
himself,  even  at  the  expense  of  the  public  welfare. 
Well,  it  must  be  confessed  that  this  scheme  would 
diminish  the  incentive  to  some  extent,  albeit,  I 
surmise,   along   the   line   where   it   could   stand 
dwarfing  without  material   loss  to  the    nation. 
It  is  quite  true  that  there  would  no  longer  be  any 
incentive  to  the  promotion  of  railway  construction 
based  on  the  financial  idea  of  borrowing  the  money 
to  build  railways  and  taking  the  stock  as  a  pro- 
moter's bonus.     Likewise,  the  motive  would  be 
absent  which  promotes  the  purchase  of  a  railway 
by  individuals  and  the  sale  of  it  to  a  corporation 
for  three  times  its  cost.     Likewise,  the  incentive 
to  the  formation  of  improvement  and  construction 
companies  by  the  directors  of  railway  corpora- 
tions, whereby   they  contract  with  themselves, 
at  whatever  prices  their  conscience  will  permit,- 
for  the  building  of  their  corporation's  road,  would 
disappear.     Along  with  this  would  go  the  incen- 
tive to  a  railway  manager  to  be  a  member  of  a 
banking  firm,  or  syndicate,  which  takes  the  securi- 
ties of  his  railway  corporations  at  discounts  and 
sells  them  to  the  public  at  a  profit.     Likewise, 
sundry  other  incentives  to  railway  making  of  no 
less    laudable    character    would    no  longer  find 
scope  for  action. 

Is  it  possible  that  we  have  fallen  so  low  that 
we  can  no  longer  conceive  it  possible  that  men 


366  An  American  Transportation  System 

will  engage  in  enterprises  which  do  not  hold  out 
the  hope  of  illegal  gain?  Or  shall  I  put  it  other- 
wise, and  ask  if  the  savings  of  the  masses  are  to 
be  forever  used  by  the  rich  to  make  themselves 
richer?  Will  railroad  making  cease,  because  the 
people  who  promote  railroads  are  not  allowed  to 
use  the  peoples'  money  to  make  a  dollar  for  them 
for  each  dollar  borrowed?  And  must  they,  for 
the  encouragement  of  their  most  valued  incentive 
be  allowed  to  continue  to  capitalize  the  growth 
and  development  of  the  country,  turning  it  over 
to  themselves  in  the  form  of  $31,000,000  stock 
dividends? 

I  do  not  know  that  I  can  make  myself  clear  on 
this  subject,  but  I  should  like  to  inquire  in  whose 
fertile  brain  the  conception  first  found  growth, 
that  it  is  the  special  life-function  of  the  stock 
jobbing  capitalist  to  make  our  railways  for  us? 
Is  it  not  rather  the  business  of  the  great  civil 
engineer  than  of  the  capitalist  to  do  these  things  ? 
Why  then  has  the  mere  man  of  money  been  placed 
at  the  head  of  our  railway  enterprises?  And  is  it 
not  possible  that  we  could  find  great  engineers  to 
devise  our  railways  for  us  in  the  future?  What 
special  wisdom  does  the  mere  moneyist  possess, 
that  this  great  undertaking  should  be  turned  over 
to  him? 

What,  in  very  truth,  is  transportation  more  or 
less  than  the  carriage  of  us  and  our  products 
from  place  to  place?     And  is  not  every  bit  of 


Constitutional  Amendment  Sought  367 

this  done  by  men  who  are  employed  to  do  it? 
What  part  do  any  of  our  so-called  railway  kings 
take  in  the  actual  operation  of  our  transportation 
system?  The  part  they  take  is  the  financial  part, 
and  that  being  provided  for,  their  places  would  be 
vacant.  What  would  be  needed  at  the  head  of 
such  a  transportation  system  as  is  herein  contem- 
plated, is  a  great  executive  engineer,  just  such  a 
man  as  is  now  in  charge  of  the  operating  depart- 
ment of  every  great  railway  in  the  United  States, 
drawing  his  salary  of  $2o,ooo-$5o,ooo  per  year 
and  earning  it.  The  president  of  one  of  our 
largest  and  most  successful  railway  systems  is  a 
comparatively  poor  man.  It  is  only  by  reason 
of  the  financial  demands  of  our  railway  systems, 
that  certain  men  called  great  railway  men  have 
been  found  useful.  In  the  clash  and  interclash 
of  railway  interests,  these  men  have  filled  their 
places.  Under  a  non-competitive  system  they 
could  be  dispensed  with.  Their  services  have 
been  devoted  to  the  upbuilding  of  particular  rail- 
way systems,  not  to  the  making  of  a  transporta- 
tion system.  To  make  a  transportation  system 
requires  a  different  order  of  genius  from  that 
required  to  make  a  particular  railway  system. 

In  what  I  have  above  said,  I  do  not  mean  that 
it  should  be  inferred  that  some  of  our  railway 
men  have  not  been  great  civil  engineers  in  the 
sense  in  which  I  have  used  that  expression.  On 
the  contrary,  men  who  have  been  prominent  in 


368  An  American  Transportation  System 

that  part  of  railroading  which  has  had  to  do  with 
its  financiering,  have  told  me  that  their  chief 
delight  was  found  in  the  construction  and  opera- 
ting departments.  They  were  real  lovers  of  the 
railway — men  who  delighted  to  see  their  railway 
enterprises  pushed  on  and  on  into  new  territories, 
and  who  loved  to  see  their  roads  developed  to  the 
highest  point  of  safety  and  efficiency.  That  men 
of  this  stamp  could  not  be  found  to  take  in  charge 
the  development  of  a  transportation  system  for 
the  United  States,  is  unbelievable. 

I  hold  no  brief  to  say  good  or  ill  of  any  man, 
but  it  cannot  be  doubted  that  there  is  at  least 
one  man  in  the  United  States  to-day  who  is  pos- 
sessed of  supreme  railway  genius.  I  have  not  the 
slightest  right  or  authority  to  say  so,  yet  I  cannot 
doubt  that  Mr.  Harriman  would  consider  it  the 
greatest  honor  that  could  be  conferred  upon  him, 
to  be  placed  at  the  head  of  a  board  of  directors 
whose  duty  is  should  be  to  organize  a  transporta- 
tion system  for  his  country.  The  pity  of  it  is  that 
in  this  country,  the  ablest  men  are  practically 
debarred  from  taking  any  part  in  public  affairs, 
while  to  accomplish  their  purposes,  vicious  laws 
force  them  to  adopt  means  repugnant  to  them. 
Perhaps  the  day  will  come  when  as  a  nation,  we 
will  avail  ourselves  of  the  ability  of  our  great  men. 

The  proposed  plan  and  government  ownership 
It  may  have  been  suspected  that  this  proposed 


Constitutional  Amendment  Sought  369 

transportation  corporation  would  be  in  some 
way  under  the  control  or  management  of  the 
federal  government;  that  the  affairs  of  the  com- 
pany would  be  subject  to  the  direction  or  inter- 
ference of  some  government  bureau.  Nothing 
could  be  further  from  the  mark.  The  corporation 
is  placed  under  the  law,  not  under  the  government, 
and  the  distinction  thus  made  is  as  wide  as  it  is 
possible  to  make  it.  The  government  would  not 
own  a  share  of  stock  in  the  corporation,  nor  would 
the  government  have  any  official  of  any  sort 
connected  with  the  corporation.  The  corporation 
would  be  distinctly  private,  but  distinctly  respon- 
sible to  the  law  of  its  creation. 

Nothing,  in  my  opinion,  would  push  us  with 
greater  momentum  in  the  direction  of  imperialism, 
than  ownership  of  the  railways  by  the  federal 
government,  or  the  creation  of  the  double-headed 
monster  which  would  come  with  the  federal 
ownership  of  trunk  lines  and  the  state  ownership 
of  railways  operated  within  states. 

The  chief  objection  to  government  ownership 
and  operation  of  railways  is  not  that  it  would 
impose  a  public  debt  of  many  billions  on  the 
people,  for  that  debt  would  be  amply  secured,  and 
the  interest  paid  from  the  receipts.  Nor  is  the 
chief  objection  the  relative  inefficiency  of  govern- 
ment, as  compared  to  private  administration  of 
such  an  enterprise,  though  that  is  serious;  for 

it  is  an  undoubted  fact  that  what  is  every  man's 
24 


3  7°  An  American  Transportation  System 

business — to  wit,  the  public's — is  no  man's  busi- 
ness. In  which  aspect  there  is  but  little  use  to  com- 
pare European  experience  with  what  ours  might  be. 
For  in  Europe,  and  especially  in  all  countries 
except  England,  people  have  been  for  ages  accus- 
tomed to  military  obedience.  The  people  in  this 
country  have  not  been  so  accustomed ;  it  is  unde- 
sirable that  they  should  ever  become  so,  or  that 
they  should  ever  look  to  the  central  power  as  the 
director  of  their  actions. 

There  are  two  main  objections  to  government 
ownership  of  railways  in  the  United  States.  One 
is  largely  incident  to  the  nature  of  our  political 
system,  and  the  other  is  world-wide.  As  to  the 
first,  it  so  happens  that  each  representative  in 
congress  is  especially  the  representative  of  his 
district.  A  most  pernicious  custom  prevails  of 
carrying  bills  through  congress  by  the  swapping 
of  votes.  The  result  would  be  that  each  represen- 
tative, to  curry  favor  with  his  constituents,  would 
favor  the  building  of  new  roads  up  every  blind 
alley  in  his  district,  and  by  the  interchange  of 
votes  could  do  so;  as  is  only  too  apparent  in 
certain  legislation,  especially  concerning  appro- 
priations, at  present.  Then  again  the  constant 
tendency  of  American  politics  is  to  the  establish- 
ment of  a  machine,  and  government  ownership 
of  railways  would  change  them  from  a  plain  busi- 
ness proposition  into  a  high  political  machine. 
No  matter  how  much  appointments  might  be 


Constitutional  Amendment  Sought  371 

hedged  about  by  civil-service  enactments,  never- 
theless the  appointing  power  and  its  equivalent, 
the  power  of  removal,  must  rest  somewhere.  The 
president  would  use  it  as  he  does  and  has  in  time 
of  stress,  to  curry  favor  with  the  senators.  The 
senators,  to  hold  offices,  would,  as  they  do,  take 
into  partnership  the  representatives  in  congress 
and  the  members  of  the  state  legislatures.  They, 
in  turn,  would  take  into  partnership  the  ward 
politician,  and  the  railroad  employees  would 
support  the  machine  in  order  to  hold  their  jobs, 
and  get  better  ones.  A  machine  of  this  kind  once 
built  up,  and  sustained  by  the  ultimate  million 
of  government  employees,  to  which  would  be 
added  at  least  four  million  more  government 
employees,  when  our  railway  system  is  complete, 
could  not  be  overthrown. 

Lastly,  and  this  reason  is  world-wide,  in  the 
hands  of  an  unscrupulous  and  over  ambitious 
president,  American  Institutions  might  be  put  to 
the  test.  It  will  not  do  to  trust  too  much  to 
patriotism  against  self-interest.  The  ideal  govern- 
ment is  one  which  does  not  permit  self-interest 
to  be  arrayed  against  patriotism.  Besides  the 
people  are  much  to  blame.  There  is  a  tremen- 
dous class  of  unthinking  people  to  whom  a  presi- 
dent who  has  served,  or  appears  to  have  served, 
well  becomes  a  sort  of  hero.  They  demand  that 
he  be  kept  in  office.  To  them  a  third  term  is  no 
menace  to  American  Institutions.     It  is  but  a 


$72  An  American  Transportation  System 

step  from  a  third  to  a  fourth  term,  and  a  lesser 
step  to  life.  Given  an  unscrupulous  but  popular 
president,  and  with  the  political  machine  behind 
him  and  a  foolish  populace  demanding  him,  the 
day  of  America  as  a  Republic  is  past.  That  this 
is  not  idle  talk  is  seen  at  the  present  time,  when 
it  took  all  of  Mr.  Roosevelt's  firmness  to  keep 
a  third  term  from  being  forced  upon  him.  If 
he  had  been  unscrupulous  as  well  as  ambitious, 
then  what? 

VI.    What  Percentage  on  Investment  would 
be  Reasonable? 

Why  capital  invested  in  transportation  should  have 
a  -fixed  return 

In  a  former  portion  of  this  volume,  I  asserted 
it  as  a  prime  principle  governing  the  relations 
between  the  people  and  their  transportation 
system,  that  it  is  as  much  the  duty  of  the  govern- 
ment to  see  that  the  capital  invested  in  transportation 
receives  a  fair  return,  as  it  is  to  see  that  it  receives 
only  a  fair  return.  Or,  to  put  it  otherwise,  the 
right  of  the  government  to  limit  the  earning 
power  of  the  railway  is  the  complement  of  the 
right  of  the  railway  to  at  all  times  charge  rates 
which  will  support  it. 

Obviously  simple,  honest,  just,  and  equitable 
as  this  claim  seems  to  be,  it  will  doubtless   be 


Constitutional  Amendment  Sought  373 

disputed  by  nine  men  out  of  ten,  and  among  the 
nine  will  be  all  the  great  thinkers  on  economic 
questions.  These  great  thinkers  are  great  sticklers 
for  the  unlimited  application  of  the  law  of  supply 
and  demand.  They  exactly  overlook  the  fact 
that  the  law  of  supply  and  demand,  in  the  fixing 
of  prices,  can  have  no  application  to  an  industry 
the  earning  capacity  of  which  is  limited  by  the 
arbitrary  fiat  of  the  government.  If  railways 
were  permitted  to  make  their  rates  high  in  flush 
times,  they  could  correspondingly  lower  them  in 
dull  times.  By  this  means  they  could  accumulate 
a  surplus  in  good  times  which  would  tide  them 
over  bad  times,  just  as  any  other  well  conducted 
industry  does.  But  this  the  railways  are  not 
permitted  to  do;  with  the  result  that  they  are 
theoretically  forced  to  violate  the  economic  law 
above  referred  to.  Theoretically,  when  traffic 
is  light  railways  must  charge  higher  rates  than 
when  traffic  is  heavy.  The  obverse  of  this 
would  be  true  under  natural  conditions,  that  is, 
railway  rates  would  fluctuate  with  the  fluctuating 
prices  of  the  commodities  they  carry,  as  well  as 
with  the  prices  of  labor,  money,  and  all  else  which 
enters  into  the  cost  of  conducting  transportation. 
The  right  of  the  legislative  authority  to  fix 
maximum  rates  above  which  the  railways  may 
not  charge,  is  a  crystallized  idea.  But  the  courts 
have  uniformly  held,  that  the  rates  made  by  the 
legislative  authority  must  not  be  so  low  that  the 


374  An  American  Transportation  System 

railway  is  deprived  of  its  capacity  to  earn  its 
operating  and  maintaining  charges  and  a  reason- 
able return  on  its  invested  capital.  This  is 
tantamount  to  an  admission  that  rates  may  at 
all  times  be  charged  which  will  produce  these 
results.  This  is  exactly  the  equivalent  of  a 
public  guarantee  that  the  railway  may  always 
earn  a  certain,  though  indefinite,  return  on  its 
capital.  It  is  indefinite  solely  because  the  legisla- 
tive authority  has  never  yet  determined  what 
return  would  be  reasonable.  What  I  ask  to  have 
done  is,  that  the  supreme  legislative  authority 
shall  now  determine  what  certain  income  the 
railway  is  entitled  to  earn;  in  other  words,  what 
percentage,  or  interest,  or  dividend  the  capital 
invested  in  the  transportation  system  is  entitled 
to  earn. 

At  theoutset  of  this  inquiry  the  question  presents 
itself:  Why  should  the  capital  invested  in  trans- 
portation be  guaranteed  a  fixed  return?  There 
is  no  such  guarantee  as  to  industries  in  general. 
The  money  invested  in  the  banking  business  has 
to  accept  such  rates  of  interest  as  the  law  of 
demand  and  supply  permits.  Manufacturing  con- 
cerns make  profits  or  no  profits  according  to  the 
state  of  the  trade.  Sometimes  the  farmer  makes 
money,  and  again  his  crop  sells  for  less  than  it 
costs  him  to  produce  it.  Why  should  the  carrying 
trade  be  exempt  from  this  law?  On  inquiry,  we 
find  that  the  railway  is  not  the   only  industry 


Constitutional  Amendment  Sought  375 

which  has  this  guarantee.  It  applies  practically 
to  all  quasi-public  industries — to  corporations 
supplying  the  public  with  light,  water,  street-car 
service,  and  the  like.  As  to  none  of  these,  may 
the  legislative  power  reduce  their  charges  so  low 
that  they  may  not  earn  a  reasonable  interest  on 
their  invested  capital. 

There  are  two  reasons  for  this.  The  first  is 
the  one  gi  ven  at  the  head  of  this  section .  Common 
justice  dictates,  that  the  right  of  the  state  to 
limit  earning  power  is  the  correlative  of  the  duty 
of  the  state  to  guarantee  the  right  to  earn  a  fair 
return.  The  other  reason  is  the  reason  of  necessity. 
Without  this  guarantee  we  would  not  have  the 
railway.  No  one  except  a  lunatic  would  put  his 
money  into  a  venture  which  the  state  claims  the 
right  to  make  worthless. 

But  the  right  to  earn  a  fixed  income  is  not  only 
justified  by  the  dictates  of  common  honesty  and 
the  law  of  necessity ;  it  is  justified  likewise  by  the 
highest  principles  of  business  prudence.  Trans- 
portation is  the  common  servant  of  all  the  industries. 
Without  it  they  are  nothing.  It  is  this  unique 
position  of  transportation  in  the  activities  of 
life — this  position  of  common  servant  to  all — 
that  makes  its  support  a  simple  proposition  of 
business  prudence.  The  railway  does  not  exist 
for  itself,  it  exists  exclusively  for  others.  Though 
it  adds  to  the  value  of  what  is  produced,  it  is  not 
itself   a   producer.    Though   an   enormous    con- 


376  An  American  Transportation  System 

sumer,  it  consumes  only  to  give  it  the  capacity  to 
serve.  It  is  nothing  but  an  intermediary  between 
producer  and  consumer.  It  adds  to  the  value  of 
production,  and  everywhere  lessens  the  cost  of 
consumption.  If  common  sense  cannot  induce 
producers  and  consumers  to  support  the  industry 
upon  which  they  both  depend  for  existence,  no 
refinement  of  argument  can  do  so. 

I  am  tempted  to  give  yet  another  reason  why 
the  capital  invested  in  transportation  should  have 
a  fixed  return,  though  in  doing  so  I  am  not  un- 
aware that  I  am  treading  on  dangerous  ground. 
The  whole  world,  but  more  especially  the  whole 
American  world,  is  very  rapidly  undergoing  a  most 
remarkable  industrial  change.  It  is  a  change 
from  the  individual  to  the  corporation.  With 
the  exception  of  the  agricultural  industry,  men 
are  very  rapidly  losing  their  individual  industrial 
existence,  which  is  being  merged  into  corporate 
industrial  existence.  It  is  not  with  this,  but 
with  the  result  which  necessarily  flows  from  it, 
that  I  am  now  concerned. 

The  wealth  of  the  world  is  rapidly  transforming 
itself  into  the  form  of  corporate  securities.  With 
the  disappearance  of  the  individual  as  an  inde- 
pendent producer,  is  passing  away  the  opportunity 
of  the  individual  for  the  independent  investment 
of  his  savings.  About  all  the  choice  which  he 
has  is  to  deposit  his  savings  in  a  savings  bank, 
or  to  invest  them  in  the  securities  of  corporations. 


Constitutional  Amendment  Sought  377 

To  what  extent  is  the  government  charged  with 
the  responsibility  of  seeing  that  the  securities  in 
which  its  people  invest  their  savings  are  worthy? 
The  old  school  of  thinkers,  with  the  teachings 
of  which  I  have  been  saturated  from  youth,  will 
say,  caveat  emptor — let  the  purchaser  beware. 
If  he  gets  swindled  it  is  his  own  affair.  Men's 
wits  have  grown  by  being  swindled :  that  is  the 
only  way  the  human  race  progresses.  It  is  no 
business  of  the  government  to  supervise  invest- 
ments. But  for  myself,  I  am  not  so  sure  of  the 
validity  of  this  argument  as  I  once  was.  A 
principle  which  may  be  very  applicable  to  a  horse 
trade,  may  fail  when  applied  to  the  billions  of 
complicated  securities  which  constitute  our  cor- 
porate wealth,  and  form  practically  the  only 
investment  for  savings.  Even  the  wise  investi- 
gator who  takes  plenty  of  time  and  employs  all 
available  means,  finds  difficulty  in  deciding  upon 
the  merits  of  these  securities.  What  chance  then 
has  the  poor  fellow  who  in  the  end  would  know 
nothing  about  them,  if  he  spent  a  lifetime  in  an 
attempt  to  fathom  their  mysteries?  It,  there- 
fore, occurs  to  me,  that  about  as  little  as  a  govern- 
ment could  do,  would  be  to  compel  corporations 
to  make  at  least  a  prima  facie  showing  of  honesty 
in  their  securities,  before  they  floated  them  upon 
the  public.  But,  however  that  may  be,  one 
result  would  follow  the  transformation  of  our 
railway    corporations    as    herein    contemplated: 


37%  An  American  Transportation  System 

There  would  be  billions  of  dollars  of  simple,  stable 
first-class  securities  in  which  the  people  could 
invest  their  savings  without  the  fear  of  being 
robbed  overnight,  and  at  the  same  time  the 
investment  would  subserve  the  highest  industrial 
purpose  that  I  know  of — the  making  of  a  first- 
class  transportation  system  for  this  country. 

The  Stock  Exchange  and  values 

In  view  of  the  somewhat  radical  views  which 
I  have  rather  freely  expressed,  it  will  doubtless 
seem  strange  that  I  have  not  broken  loose  on  the 
New  York  Stock  Exchange.  The  reason  for 
my  not  having  done  so,  is  because  I  do  not  think 
it  deserves  a  tenth  part  of  the  censure  it  receives. 
I  have  already  said  that  it  is  a  market  for  securi- 
ties, not  a  manufacturer  of  them.  What  is  it 
that  gives  value  to  anything?  It  is  the  simple 
fact  that  there  is  a  market  where  it  may  be  sold. 
Without  a  market,  nothing  which  cannot  be  used 
as  food  or  for  warmth  has  any  value.  If  the 
Exchange  were  closed  even  temporarily,  values 
would  fall  enormously.  If  it  were  permanently 
closed,  most  of  our  industries  would  be  soon 
seriously  crippled,  if  not  actually  driven  out  of 
business.  People  ought,  therefore,  to  think  twice 
before  they  speak  of  interfering  with  the  opera- 
tions of  a  free  market,  not  to  mention  closing  it> 
as  some  of  our  political  agitators  would  do. 


Constitutional  Amendment  Sought  379 

It  is,  however,  with  what  is  commonly  called 
"market  manipulation"  that  we  are  here  inter- 
ested. Manipulation  is  made  possible  almost 
solely  by  reason  of  the  inherent  instability  of 
securities.  Securities  which  have  a  fixed  and 
certain  income,  are  governed  in  price  almost 
entirely  by  the  value  of  money,  that  is,  its  earning 
power  at  any  particular  time.  It  is  the  play  upon 
hopes  that  makes  manipulation  possible,  and  there 
can  be  no  considerable  play  upon  hopes,  when 
the  security  is  known  to  be  absolutely  good  and 
to  have  an  invariable  income.  If  it  is  desirable 
to  stop  manipulation,  the  way  to  do  it  is  to  make 
securities  stable. 

Next,  given  even  fair  stability,  the  most  impor- 
tant preventive  of  the  creation  of  an  artificial 
market  is  the  quantity  of  the  security.  Of  course, 
in  these  days  of  gigantic  financiering,  a  hundred 
million  dollars  is  no  great  affair.  Nevertheless 
it  is  true  that  the  securities  of  corporations  having 
relatively  small  capital  stocks,  are  much  more 
easily  manipulated  than  those  having  large  issues, 
simply  because  the  larger  the  issue  the  more 
money  it  requires  to  control  the  market.  Other 
things  being  equal,  the  larger  the  capitalization 
of  a  corporation  and  the  more  widely  its  securities 
are  distributed,  the  less  likelihood  there  is  of 
attempted  manipulation.  And  if  the  issue  were 
large  enough  and  the  security  stable,  manipulation 
would  be  quite  impossible.     If,  for  instance,  there 


380  An  American  Transportation  System 

were  fifteen  billions  of  uniform  stock  of  the  Ameri- 
can Transportation  Corporation,  with  a  fixed 
earning  capacity,  I  think  it  unlikely  that  any 
man,  or  any  set  of  men,  would  be  crazy  enough 
to  attempt  to  move  this  enormous  mass  of 
securities. 

I  do  not  claim  that  there  would  be  no  oscilla- 
tion in  the  market  value  of  such  securities.  1 
am  speaking  only  of  their  artificial  manipulation. 
Under  normal  conditions — that  is,  in  the  absence 
of  wars,  panics,  and  catastrophic  events,  such 
securities  would  be  expected  to  move  only  with 
the  changing  value  of  money. 

This  much  being  said  in  favor  of  our  transporta- 
tion corporation 's  stock  being  given  a  fixed  income, 
let  us  next  inquire  (i),  what  authority  should 
determine  what  the  rate  per  cent,  of  income 
should  be,  and  (2) ,  what  rate  should  be  reasonable 
and  fair. 

What  authority  should  determine  railway  income? 

As  to  the  authority  which  should  determine 
what  percentage  of  income  the  capital  invested 
in  transportation  is  entitled  to  receive,  three 
suggestions  present  themselves,  to  wit: 

(1)  It  might  be  left  to  congress  to  determine 
from  time  to  time. 

(2)  It  might  be  left  to  a  court  to  determine 
yearly,  or  at  stated  periods. 


Constitutional  Amendment  Sought  381 

(3)  It  might  be  determined  by  the  supreme 
legislative  act  of  the  people. 

In  my  opinion,  for  every  reason  which  appeals 
to  me,  the  authority  which  should  determine 
this  matter  is  the  people,  and  it  should  be  ex- 
pressed in  unmistakable  language  in  the  act  which 
creates  the  corporation.  The  rate  per  cent,  should 
be  fixed  in  the  constitution,  not  by  any  words 
which  can  admit  of  interpretation,  not  by  loose 
language  to  be  buffeted  about  by  different  courts, 
nor  by  any  such  vague  and  uncertain  phrase  as ' '  that 
the  capital  invested  in  transportation  is  entitled 
to  a  fair  return,"  but  by  an  explicit  statement 
of  the  exact  percentage  to  which  invested  capital 
is  entitled.  And  for  every  conceivable  reason, 
it  should  not  be  left  to  either  congress  or  the 
courts  to  determine  this  matter. 

If  it  be  left  to  congress  to  define  from  time  to 
time  what  the  rate  per  cent,  of  income  should  be, 
that  simply  means  that  the  whole  railroad  ques- 
tion is  to  remain  a  political  canker.  Demagogues 
will  live  on  it.  If  it  is  left  to  the  courts  to  deter- 
mine what  income  is  fair,  we  will  have  as  many 
different  opinions  on  it  as  there  are  courts.  Past 
experience  with  the  courts  on  this  question  is  not 
favorable  to  the  continuance  of  their  authority. 
It  is  well  known,  that  some  courts  have  held  that 
even  10%  is  not  an  unfair  income. 

But  the  supreme  reason  why  the  determination 
of  this  most  important  question  should   be  left 


382  An  American  Transportation  System 

to  neither  congress  nor  the  courts  is,  because  it 
would  destroy  that  fixedness  of  character  of 
railway  investment  from  which  so  large  an  advan- 
tage over  present  methods  may  be  expected. 
To  leave  to  either  congress  or  the  courts  the  power 
to  fix  the  rate  per  cent,  of  income  from  time  to 
time,  would  be  to  perpetuate  gambling  of  the 
worst  kind :  for  it  would  then  be  gambling  on  the 
decision  of  courts  or  congress.  A  raising  or 
lowering  of  the  rates  by  congress,  or  the  courts, 
would  mean  the  making  or  the  loss  of  hundreds 
of  millions  of  dollars.  The  door  would  be  open 
for  such  scandals  as  we  have  not  dreamed  of. 
A  change  of  even  one  per  cent,  in  the  rate  of  inter- 
est, would  mean  a  change  of  values  of  from  three 
hundred  to  four  hundred  millions  of  dollars. 
And  this  could  be  accomplished  overnight,  by  the 
decision  of  the  court  or  an  act  of  congress.  Better 
the  ills  we  have,  than  flight  to  such  as  those. 
No,  whatever  the  rate,  it  should  be  fixed  and 
certain,  and  this  can  be  accomplished  in  but  one 
way,  by  making  it  a  part  of  the  supreme  legislative 
act,  the  constitution. 

Further  consideration  of  this  matter  will  appear 
under  the  next  heading. 

What  the  rate  per  cent,  of  income  should  be 

Presuming  that  the  rate  per  cent,  which  the 
transportation    corporation    should    be    allowed 


Constitutional  Amendment  Sought  383 

to  earn  and  pay  on  its  invested  capital  is  fixed 
in  the  organic  act  creating  the  corporation,  what 
should  that  rate  per  cent,  be?  It  should  conform 
to  three  principles: 

(1)  Justice  to  the  public,  to  which  transporta- 
tion is  a  necessity. 

(2)  Justice  to  those  who  have  invested  their 
money  in  transportation,  or  who  may  do  so,  for 
the  benefit  alike  of  themselves  and  the  public. 

(3)  The  rate  should  be  such  that  the  American 
transportation  security  would  command  the  invest- 
ment market  of  the  world. 

What  would  be  justice  to  the  public?  You 
cannot  answer  this  question  under  present  condi- 
tions, with  the  same  persuasion  that  you  could 
if  we  were  working  under  the  proposed  plan. 
While,  theoretically,  railway  corporations  are 
permitted  to  earn  a  fair  return  on  their  investment, 
yet  at  the  present  time  the  amount  and  character 
of  the  investment  are  so  doubtful  as  to  permit 
of  nothing  less  than  continuous  agitation  as  to 
what  a  fair  return  should  be.  At  present  we  are 
constantly  met  with  such  apparently  valid  argu- 
ments as  these:  Why,  in  the  nature  of  things, 
should  the  transportation  business  pay  less  than 
other  industrial  enterprises?  Is  not  the  business 
as  precarious  as  that  of  manufacturers?  Does 
not  the  railway  show  a  larger  percentage  of  bank- 
ruptcies than  almost  any  other  business?  Does 
not  one-half  the  capital  invested  in  it  go  starved 


384  An  American  Transportation  System 

all  the  time?  What  industry  is  there,  the  net 
profits  in  which  are  so  low  as  in  the  transportation 
industry  ? 

To  all  of  these  apparently  valid  arguments  we 
reply:  Under  the  proposed  plan,  it  is  purposed 
to  make  the  railways'  rights  in  practice  what  they 
now  are  in  theory.  We  purpose  to  give  you  a 
fixed  income,  guaranteed  by  your  right  to  at  all 
times  charge  rates  which  will  produce  it.  Thus 
your  business  will  lose  its  precariousness ;  bank- 
ruptcies will  be  impossible.  The  security  will 
be  the  best  in  the  world.  Under  such  circumstan- 
ces, justice  to  the  public  demands  that  it  shall 
borrow  capital  at  the  best  price  it  can,  consistently 
with  the  two  other  principles  above  mentioned. 
Obviously,  this  best  price  is  about  the  average 
current  rate  of  interest  in  the  investment  markets 
of  the  world. 

What  is  justice  to  those  who  have  invested  or 
will  invest  their  capital  in  transportation?  As 
to  those  who  have  in  the  past  loaned  their  money 
to  the  railways  at  fixed  rates  of  interest,  justice 
demands  that  these  contracts  be  carried  out  where 
they  are  free  from  the  taint  of  fraud.  It  may 
be  presumed  that,  in  general,  railways  which  have 
borrowed  money  in  the  past  have  done  so  on 
about  the  most  favorable  terms  they  could.  As 
to  those  who  have  invested  in  the  stocks  of  cor- 
porations, they  have  done  so  with  the  full  know- 
ledge that  the  people  reserved  the  right  to  make 


Constitutional  Amendment  Sought  385 

their  investments  return  to  them  only  what  is 
reasonable;  which  subject  has  been  already 
fully  considered.  All  that  need  be  added  is  this: 
that  while  the  people  have  the  sovereign  might 
to  say  what  income  these  investors  shall  receive 
in  the  future,  that  is  all  the  more  reason  why  they 
should  use  that  great  power  to  work  no  injustice. 
The  American  people  can  never  afford  to  do  an 
act  of  injustice.  "It  is  excellent  to  have  a  giant's 
strength,  but  it  is  tyrannous  to  use  it  like  a  giant. " 

What  rate  would  command  the  investment 
market  of  the  world  for  the  American  transpor- 
tation security?  This  I  apprehend  is  the  most 
important  question  of  all.  After  all  is  said  and 
done,  if  you  are  a  borrower,  you  must  borrow 
on  the  terms  of  the  lender ;  that  is,  on  the  market 
value  of  money. 

There  are  two  well-known  facts  which  should  be 
preliminarily  stated.  The  first  is  that  it  is  not 
so  much  the  rate  of  interest  which  your  security 
pays,  as  it  is  the  character  of  the  security  and 
the  market  value  of  money  at  the  time  of  the  sale, 
which  is  important.  Within  certain  limits,  if 
the  security  is  "gilt-edged''  and  money  is  worth, 
say  4%>  the  amount  of  money  which  came  to 
you  from  the  sale  of  the  security  would  depend 
on  the  rate  of  interest  which  it  paid.  It  would 
even  up  on  a  4%  basis.  Under  such  circum- 
stances a  security  paying  6%  would  probably 
bring  you  from  30%  to  40%  premium  if  it  ran 


386  An  American  Transportation  System 

for  a  long  period.  Or  if  it  paid  5%,  it  would 
bring  you  from  15%  to  20%  premium.  Or  if 
it  paid  3%,  it  would  have  to  be  sold  at  a  discount 
of  from  10%  to  15%.  I  mention  these  facts  to 
disabuse  the  mind  of  the  uninitiated  of  the  idea 
that  the  rate  per  cent,  is  of  such  unlimited  impor- 
tance as  it  would  seem  at  first  to  be.  The  extra 
amount  of  money  which  you  get  on  the  sale  of  a 
5%  security  over  that  which  you  would  get  on 
the  sale  of  a  4%  security,  theoretically  compen- 
sates you  for  the  payment  of  the  extra  1  %  inter- 
est. If  the  security  were  absolutely  safe  and 
matured  at  a  fixed  date,  this  theoretical  compen- 
sation would  be  realized  in  practice.  But  if  the 
security  had  no  fixed  date  of  maturity,  the  theo- 
retical compensation  would  not  be  so  completely 
realized. 

The  other  fact  to  which  I  desire  to  call  atten- 
tion, is  the  relation  which  exists  between  the 
total  expenses  of  a  transportation  corporation 
and  that  part  of  the  expense  which  consists  in 
the  interest  and  dividends,  or  returns  which  go 
to  the  invested  capital.  In  the  year  1906,  the 
bare  expense  of  operating  our  railway  system, 
including  taxes,  was  about  75%  of  the  total 
expenses,  while  about  25%  was  paid  out  in  the 
form  of  interest  and  dividends  to  invested  capital 
or  retained  as  surplus.  In  order  to  pay  the 
alleged  invested  capital  an  average  income  of  about 
4%,  it  required  about  $530,000,000  of  the  com- 


Constitutional  Amendment  Sought  387 

panies*  receipts.  If  the  rate  per  cent,  had  been 
5  instead  of  4,  there  would  have  been  paid  out 
about  $650,000,000  or  say  $120,000,000  more. 
I  call  attention  to  this  now  to  show  that  an  almost 
infinitesimal  advance  in  freight  rates,  of  a  little 
over  one  half  of  one  mill  per  ton  per  mile,  would 
have  enabled  the  railway  system  to  pay  5% 
instead  of  4%  on  the  invested  capital. 

Yet  whether  the  securities  were  on  a  basis 
of  4%  or  5%  would  probably  decide  whether  or 
not  they  would  command,  at  all  times,  the  invest- 
ment market  of  the  world.  If  they  were  on  a 
basis  of  5%,  there  is  little  doubt  that  they  would 
be  looked  upon  as  the  best  security  in  existence; 
if  they  were  on  a  4%  basis,  it  is  doubtful  whether 
they  would  occupy  any  other  than  a  commonplace 
position.  Yet  this  comparatively  trifling  differ- 
ence might  be  the  means  of  saving  us  from  a  money 
stringency  or  a  financial  panic,  in  which  billions 
would  be  washed  away.  They  would  be  the 
greatest  liquid  asset  possessed  by  any  nation  in 
the  world. 

If,  therefore,  we  had  in  mind  the  benefit  which 
would  come  to  the  country  from  the  rate  per  cent, 
which  railway  securities  should  pay,  it  should 
be  high  enough  to  make  them  prime  securities 
in  every  sense — prime  in  the  sense  of  their  ready 
salability  in  the  markets  of  the  world,  and  prime 
in  the  sense  of  affording  greatest  stability  to 
banks  and  other  institutions  which  would  receive 


388  An  American  Transportation  System 

them  as  collateral  for  loans.  Are  we  entitled 
to  take  this  element  into  consideration  in  fixing 
the  interest-bearing  rate  of  the  securities?  Un- 
doubtedly, if  we  are  broad  enough  to  look  at  the 
balance  sheet  of  the  whole  country — if  we  are 
broad-minded  enough  to  see  how  a  trifling  expense 
to  the  whole  country  may  be  used  to  return  many 
times  itself  in  profits  to  the  whole  country.  I 
mention  this  more  particularly,  because  I  can 
hear  the  howl  that  would  go  up  from  every  dema- 
gogic throat  that  these  securities  should  be  on  a 
3%  basis. 

I  do  not  recall  that  there  is  any  state  in  this 
country  wherein  the  legal  rate  of  interest  is  less 
than  5%.  Will  it  be  claimed  that  the  money 
which  supports  the  industry  upon  which  all 
other  industries  depend,  should  earn  less  than 
the  legal  rate  of  interest  ? 

It  is  not  improbable  that  I  am  so  devoted  to 
the  idea  of  a  first-class  transportation  system  and 
the  entire  stability  of  its  securities,  as  opposed 
to  the  idea  of  a  cheap  system  and  one  whose 
securities,  are  as  variable  as  the  winds,  that  I  do 
not  attach  sufficient  importance  to  the  rate  per 
cent,  on  the  investment,  or,  rather,  to  the  obtain- 
ing of  the  lowest  rate  on  which  we  could  squeeze 
through.  Until  recently,  the  constant  tendency 
has  been  in  the  direction  of  lowered  interest  rates 
on  good  railroad  bonds,  but  it  must  not  be  for- 
gotten that  this  saving  is  more  than  lost  by  reason 


Constitutional  Amendment  Sought  389 

of  the  high  dividend  rates  paid  by  the  roads  having 
the  lowest  interest  bonds. 

By  many  it  would  be  thought  strange  that  a 
proposition  should  be  advanced  for  a  uniform 
rate  of  5%,  when  our  whole  system  now  pays 
only  about  4%.  But  several  facts  of  prime  impor- 
tance are  overlooked,  among  them  these:  that  the 
capitalization  upon  which  4%  is  paid  includes 
at  least  three  billion  dollars  of  duplicated  securi- 
ties— the  securities  of  the  various  roads  owned 
by  one  another,  that  an  inventory  and  appraisal 
of  the  roads  would  probably  reduce  their  total 
capitalization  from  three  to  five  billion  dollars, 
and  that  the  return  now  received  on  the  actual 
value  of  the  roads  is  much  nearer  7%  than  it 
is  4%. 

Redeemability  of  proposed  securities 

There  is  another  question  relating  to  these 
proposed  securities  which  I  may  as  well  refer  to 
now  while  I  think  of  it.  If  any  one  has  tired 
himself  by  reading  this  book,  there  will  doubtless 
have  occurred  to  him  this  query:  When  are 
these  securities  to  be  paid  off  or  redeemed  ?  And 
the  answer  is:  they  are  never  to  be  paid  off 
or  redeemed.  But,  you  ask,  does  not  that  at 
once  destroy  their  value?  And  the  answer  is: 
that  there  is,  with  an  occasional  exception,  not  a 
redeemable  railway  security  in  the  world  to-day, 


39°  An  American  Transportation  System 

aside  from  American  railway  bonds,  and  it  is 
that  very  character  of  our  bonds  which  has  led 
us  into  about  ninety  per  cent,  of  our  railway 
financial  troubles.  Not  only  are  railway  securi- 
ties elsewhere  not  redeemable,  but  nearly  one- 
half  of  our  securities  are  not  redeemable.  Railway 
stocks  have  nothing  of  the  redeemable  character 
attached  to  them. 

It  is  unnecessary  for  me  to  say  to  those  familiar 
with  the  subject,  that  corporate  stocks  are  evi- 
dences of  ownership  in  the  physical  property  they 
represent.  They  get  added  value  from  the  fact 
that  they  live  forever,  not  from  the  fact  that 
they  are  ever  to  be  paid  off.  Nor  need  I  more 
than  refer  to  the  fact  that  even  bonds  which 
have  their  dates  of  maturity  so  distant  that 
nobody  ever  expects  to  live  to  see  them  paid  off, 
are  much  more  favorably  regarded  than  such  as 
run  for  a  short  time  only.  As  witness  the  fifty 
million  4%  West  Shore  bonds,  which  mature 
January  1st,  in  the  year  2361,  and  which  are 
regarded  as  among  the  very  highest-class  securities 
in  the  market.  These  bonds  run  for  475  years 
from  the  date  of  their  issue!  So,  even  in  the  case 
of  bonds,  it  is  the  certainty  of  the  payment  of 
interest  coupled  with  the  existence  of  a  market 
(the  condemned  New  York  Stock  Exchange) 
where  they  may  be  bought  and  sold,  that  gives 
them  their  value.  Not,  of  course,  that  I  mean 
that  the  security  must  not  also  be  good,  but  the 


Constitutional  Amendment  Sought  391 

possession  of  a  mortgage  bond  is  no  better  evidence 
of  ownership  than  the  possession  of  stock,  which 
is  the  direct  and  immediate  evidence  of  ownership 
and,  ordinarily,  much  more  salable. 

VII.    The  Revenue  to  Support  the  System 

What  the  support  of  a  railway  means 

All  through  this  work  I  have  argued  that  a 
railway  should  be  constructed  and  equipped  as 
a  first-class  going  enterprise  by  means  of  money 
derived  from  subscriptions  to,  or  the  sale  of,  its 
capital  stock.  Not  only  has  this  principle  been 
persistently  violated  by  the  building  and  equip- 
ment of  roads  out  of  money  derived  from  the 
sale  or  other  disposition  of  their  bonds,  but  the 
half  finished  roads  thus  built  and  equipped,  have 
been  put  in  a  more  or  less  finished  condition  out 
of  income  derived  from  the  collection  of  freights 
and  fares.  Nor  is  that  all.  It  has  been  the 
settled  policy  of  American  railways  to  devote  a 
considerable  amount  of  their  income  to  the  making 
of  new  and  permanent  improvements,  or  even  to 
the  construction  of  entirely  new  roads.  This 
financial  policy  has  even  been  the  subject  of  much 
praise,  because,  it  has  been  argued,  it  showed  a 
conservative  and  economical  disposition  on  the 
part  of  the  roads.  Instead  of  distributing  their 
income  as  dividends  to  the  full  extent  that  they 


392  An  American  Transportation  System 

might  have  done,  they  have  put  their  surplus 
income  back  into  improvements,  as  they  are 
called. 

Nothing  looks  nicer  than  this  scheme  until  you 
come  to  consider  what  it  means;  which  exactly 
is  this:  the  shareholders,  instead  of  going  into 
their  own  pockets  for  money  to  make  their  new 
improvements,  have  simply  gone  into  the  pockets 
of  their  patrons.  They  have  charged  higher 
freights  and  fares  than  would  have  been  required 
to  pay  reasonable  dividends,  and  they  have  cov- 
ered up  or  sunk  the  excessive  collections  in  new 
improvements,  which  have  added  to  the  value  of 
their  holdings.  They  dared  not  declare  their 
excessive  income  as  dividends,  nor  yet  keep  it  as 
surplus ;  for  in  either  case  they  would  have  brought 
down  upon  them  legislation  limiting  their  rates. 
So  long  as  their  accounts  showed  low  earning 
powers,  they  did  not  fear  legislative  interference. 
Hence  this  surplus  had  to  be  covered  up  and  the 
mode  of  concealing  it  was  in  improvements, 
which  were  generally  charged  to  the  operating 
or  maintenance  accounts.  It  must  be  remembered 
that  it  is  only  very  recently  that  there  has  been 
any  public  supervision  over  railway  book-keeping, 
if  indeed  there  is  any  yet.  However,  that  is  not 
the  point;  which  is,  that  this  financial  method 
has  met  with  approval,  and  some  of  our  best  roads 
defend  it. 

But  this  practice  is  utterly  without  justification. 


Constitutional  Amendment  Sought  393 

It  is  the  duty  of  the  owners  of  a  railway  to  build 
and  equip  it — to  make  it  a  railway  in  every  sense 
of  the  word.  It  is  then  the  duty  of  the  public  to 
pay  freights  and  fares  to  maintain  the  road  in  as 
good  condition  as  its  owners  made  it  and  sufficient 
to  cover  operating  expenses  and  to  pay  the  owners 
a  reasonable  return  on  their  investment.  When 
these  two  accounts  are  balanced,  the  railway  has 
done  its  duty  to  the  public  and  the  public  has  done 
its  duty  to  the  railway.  For  exactly  the  same 
reason,  if  the  railway  finds  it  beneficial  to  make 
new  and  permanent  improvements  adding  to  the 
value  of  the  original  investment,  or  to  make  exten- 
sions, its  owners  should  go  to  the  same  source 
whence  they  got  the  money  to  build  the  road 
originally,  and  if  these  improvements  make  it 
necessary  to  charge  higher  rates  the  public  should 
pay  them.  This  is  not  only  the  ethical  relation 
which  exists  between  the  public  and  its  railway 
system,  but  it  is  as  well  the  contractual  relation. 
It  is  nothing  more  or  less  than  a  fraud  on  the 
public,  for  the  railways  to  charge  the  public  exces- 
sive freights  and  fares  and  sink  the  money  in  new 
improvements.  They  had  exactly  as  well  declared 
them  in  the  form  of  dividends;  for  in  either  case 
the  shareholders  became  the  beneficiaries  of  money 
extorted  from  the  public. 

It  is  unnecessary  to  say  that  under  the  plan 
herein  proposed,  no  greater  freights  or  fares 
would  be  exacted  from  the  public  than  would  be 


394  An  American  Transportation  System 

required  in  the  aggregate  to  operate  and  maintain 
the  system,  pay  reasonable  dividends,  and  keep  a 
surplus  against  contingencies.  If  further  capital 
were  required  for  new  and  additional  roads  or 
improvements  permanent  in  character  and  adding 
to  the  value  of  the  investment,  that  capital  should 
be  raised  by  the  sale  of  additional  stock  exactly 
like  all  other  stock. 

How  the  aggregate  requirements  would  be  ascertained 

I  regard  it  as  a  fact  of  first-rate  scientific  inter- 
est, that  one  may  be  able,  a  year  in  advance,  to 
estimate,  within  narrow  limits,  not  only  the  aggre- 
gate amount  required  for  the  support  of  the  railway 
system  of  the  United  States,  but  also,  within  the 
range  of  the  third  decimal,  the  average  amount 
which  would  have  to  be  charged  against  each  ton 
of  freight  carried  a  mile  and  each  passenger  carried 
a  mile,  to  produce  the  required  aggregate.  Of 
course,  I  do  not  mean  that  the  estimate  would  not 
vary  from  the  requirement  by  a  few  millions  of 
dollars.  But  it  must  be  remembered  that  we  are 
dealing  with  hundreds  of  billions  of  tons  of  freight 
moved  one  mile  and  hundreds  of  millions  of  passen- 
gers carried  one  mile,  and  that  the  aggregate  of 
collections  is  upward  of  two  billions  of  dollars. 
Still,  utterly  unforeseen  events  eliminated,  the 
calculation  could  be  made  in  advance  with  great 
accuracy. 


Constitutional  Amendment  Sought  395 

In  the  year  1906,  the  number  of  passengers 
who  travelled  on  our  railways  was  797,946,116, 
and  the  average  journey  per  passenger  was  31.54 
miles.  If  we  multiply  the  number  of  passengers 
by  the  average  miles  of  journey,  we  shall  get 
what  is  called,  in  railway  parlance,  the  number 
of  passengers  carried  one  mile,  and  this  gives  the 
enormous  total  of  25,167,240,831.  For  all  the 
passenger  service  the  railways  received  an  aggre- 
gate revenue  of  $510,032,583.  If  we  divide  this 
aggregate  revenue  by  the  total  number  of  passen- 
gers carried  one  mile,  we  shall  get  the  average 
price  which  the  railways  received  for  each  mile 
they  carried  a  passenger.  This  shows  that  they 
received  two  cents  and  three  thousandths  of  a 
cent  (2.003)  Per  mile.  Calculations  after  the 
same  fashion  show,  that  the  railways  received  an 
average  of  seven  hundred  and  forty-eight  thou- 
sandths of  a  cent  (.748),  or  nearly  7^  mills,  per  mile 
for  each  ton  of  freight  carried  one  mile,  and  the 
aggregate  amount  which  the  railways  received  in 
that  year  for  carrying  passengers  and  freight  was, 
in  round  numbers,  two  billion  one  hundred  and 
fifty  million  dollars.  We  do  not  know  just  what 
it  cost  the  railways  to  do  the  transportation  busi- 
ness of  the  country,  because  we  do  not  know  the 
amount  of  their  total  income  which  they  sink  in 
permanent  improvements,  but,  accepting  their 
figures,  it  would  appear  that  it  took,  in  round 
figures,  one  billion  five  hundred  and  thirty-six 


396  An  American  Transportation  System 

million  dollars  to  carry  on  their  business,  not 
counting  anything  for  income  on  the  capital 
invested.  They  had  sundry  other  sources  of  in- 
come, and  out  of  this  total  income  over  and  above 
the  total  cost  of  carrying  on  their  business,  they 
were  able  to  pay  to  the  alleged  invested  capital 
about  4%  and  have  a  reasonable  surplus  left 
over. 

Thus  it  will  be  seen  that  there  is  no  great  diffi- 
culty in  ascertaining  in  advance  about  the  average 
freight  and  passenger  rates  required  to  support 
the  railway  system.  But  the  most  remarkable 
thing  of  all  is,  that  if  you  take  the  average  of 
railway  charges  over  the  ten-year  period  before 
(and  including)  1906,  you  will  find  that  the  pas- 
senger rate  per  mile  was  1.995  cents,  or  just  eight 
thousandths  of  a  cent  different  from  that  of  1906, 
and  that  the  average  freight  rate  per  ton  per  mile 
was  .756  cents,  or  just  eight  thousandths  of  a  cent 
different  from  that  of  1906.  These  calculations 
are  based  on  the  government  reports,  but  if  you 
will  accept  the  probably  more  accurate  calculations 
of  Poor,  it  will  be  found  that  the  average  passen- 
ger rate  for  the  ten-year  period  is  exactly  the  same 
as  that  for  1906,  and  that  the  average  freight 
rate  varied  from  that  of  1906  by  only  one  thou- 
sandth of  a  cent !  Considering  the  billions  of  tons 
of  freight  handled  and  the  hundreds  of  millions 
of  passengers  carried  in  the  ten  years  mentioned, 
it  would  seem  unlikely  that  similar  deductions 


Constitutional  Amendment  Sought  397 

could  be  drawn  from  any  other  department  of 
human  activities.  They  serve  to  show  the  mar- 
velous equilibrium  which  has  been  established 
between  the  business  of  the  country  and  the 
charges  and  expenses  of  railways. 

But  interesting  as  these  facts  are  they  are  of 
no  importance,  except  in  so  far  as  they  show  the 
average  rates  which  must  be  charged  to  produce 
a  given  revenue  for  the  support  of  the  railway 
system.  It  is  when  you  come  to  consider  that 
these  average  rates  (of  freight)  must  be  distributed 
and  redistributed  to  apply  to  the  ten  thousand 
articles  of  goods  wares  and  merchandise  carried 
by  our  railways  over  infinitely  varying  distances 
and  under  infinitely  varying  conditions  and  circum- 
stances, that  you  begin  to  get  into  the  realm  of 
railway  mathematics.  It  is  then  that  you  ap- 
proach the  throne  of  the  most  august  personage 
connected  with  the  railway — his  majesty,  the 
traffic  manager.  The  reason  he  is  so  important 
is  because  the  duty  devolves  upon  him  to  so  adjust 
rates  that  his  railway  can  get  the  revenue  which 
supports  it.  And  success  or  failure  means  the 
difference  between  living  and  not  living. 

Rate-making  divides  itself  cleanly  and  clearly 
into  two  almost  distinct  problems.  The  first  is 
the  problem  of  the  distance  haul.  The  second 
is  the  problem  of  the  classifying  of  commodities 
offered  to  the  railway  for  carriage.  Under  the 
first  problem  the  most  important  question  is: 


398  An  American  Transportation  System 

What,  if  any,  latitude  shall  the  railway  be  allowed 
in  its  charges  for  hauling  the  same  thing  varying 
distances  ?  Shall  it  be  allowed  to  charge  the  same 
price  for  carrying  the  same  thing  one  hundred 
miles  that  it  charges  for  carrying  it  one  thousand 
miles?  Under  the  second  problem  the  most 
important  question  is:  What  latitude  shall  the 
railway  be  allowed  in  the  distribution  of  the 
burden  of  its  support  upon  the  different  com- 
modities which  it  carries?  Shall  it  be  allowed 
to  charge  five  mills  per  ton  per  mile  for  certain 
kinds  of  merchandise,  and  ten,  twenty,  forty,  one 
hundred,  times  that  amount  for  other  kinds  of 
merchandise  ? 

At  the  outset  I  desire  to  say  that  under  present 
conditions  these  problems  present  not  the  slightest 
interest  to  me.  I  am  entirely  satisfied  that  given 
the  conditions  under  which  our  railways  have 
grown,  and  the  conditions  under  which  they  are 
at  present  operated,  railway  methods  in  these 
respects  have  been  just  what  they  were  compelled 
to  be.  Nor  am  I  seriously  impressed  by  the 
conscientious  efforts  of  the  Interstate  Commerce 
Commission  to  "equalize"  the  burdens  brought 
about  by  the  system  of  discriminations  under 
which  the  railway  has  grown.  The  trouble  is 
inherent  in  the  system  and  can,  in'  my  opinion, 
be  eradicated  only  by  a  radical  change  in  the  re- 
lations of  the  railways  to  each  other  and  to  water 
transportation.     What  interests  me  is  to  know 


Constitutional  Amendment  Sought  399 

whether  the  abuses  which  are  so  bitterly  com- 
plained of  would  disappear  if  our  transportation 
system  were  one  harmoniously  working  organi- 
zation. 

VIII.    Railway  Rates  and  Distances 

Railway  rates  and  public  policy 

It  has  been  insisted  in  the  course  of  this  argu- 
ment, that  the  transportation  system  is  primarily 
interested  in  but  one  problem — the  problem  of 
getting  revenue  enough  for  its  support,  includ- 
ing, of  course,  enough  to  make  such  a  return 
to  its  invested  capital  as  the  sovereign  power 
will  permit.  That  revenue  being  assured,  the 
transportation  system  will  perform  any  particular 
service  it  is  called  upon  to  perform,  in  such  manner 
and  at  such  rates  as  the  public  wisdom  may  decide 
it  should.  It  will  act  with  absolute  impartiality 
to  all  who  ask  its  services,  or  it  will  give  special 
preferences  to  some  shippers  or  to  some  places, 
just  as  the  people  determine.  This  would  be  the 
attitude  of  the  transportation  system  if  it  were 
one  organization. 

Of  course  the  transportation  systems  and  indi- 
vidual railways  which  we  have  now,  cannot  pursue 
the  course  of  absolute  impartiality,  simply  because 
each  system  has  to  look  out  for  its  own  bread  and 
butter,  and  if  in  doing  so  another  system  goes  short 


400  An  American  Transportation  System 

of  food — well,  that  is  its  own  affair.  In  this  case 
the  getting  of  bread  and  butter  is  the  getting  of 
business.  The  getting  of  business  is  the  getting 
of  that  necessary  aggregate  revenue.  Hence  it  is, 
that  the  railway  systems  cannot  permit  the  public 
to  interfere  with  their  methods  of  either  getting 
or  doing  business,  otherwise  public  foolishness  will 
get  the  railway  business  so  snarled  up  that  there 
will  be  a  failure  to  get  that  all-important  aggre- 
gate revenue.  But  once  assure  that,  and  the 
public  may  settle  all  intermediate  and  minor 
questions  as  it  sees  fit.  But  this  is  not  to  say 
that  they  should  not  be  settled  intelligently  and 
justly. 

It  is  questions  of  public  policy,  if  there  are 
any,  concerning  transportation,  that  we  will  now 
try  to  look  into.  Let  us  look  first  at  the  system 
of  "distance-charges"  which  has  grown  up  with 
the  railway.  By  distance-charges  I  mean  the 
charges  which  the  same  or  different  railways, 
make  for  carrying  the  same  quantity  of  the  same 
commodity  different  distances.  Let  it  at  once 
be  said  that  the  passenger  traffic  is  not,  in  any 
important  degree,  involved  in  this  problem.  A 
mile  is  a  mile  in  the  passenger  service,  and  through- 
out  the  United  States  the  rate  is  so  nearly  uniform 
in  all  directions  that  variations  are  negligible. 

The  first  question  that  the  rate-making  tyro 
asks  is:  Why  should  not  freight  rates  follow 
the   same   rule   as   passenger   rates?     Why   not 


Constitutional  Amendment  Sought  401 

charge  just  so  much  a  mile,  no  matter  whether 
freight  be  carried  one  mile  or  one  thousand  miles  ? 
These  questions  are  for  the  primer  class.  An- 
swer: Because  the  railway  would  lose  money  on 
the  one-mile  carriage,  and  the  freight  would  eat 
itself  up  on  the  thousand-mile  carriage.  Hence 
it  is  that  a  rational  reason  exists  for  a  dispropor- 
tion between  the  charges  for  a  short  haul  and 
for  a  long  haul.  It  is  not  necessary  to  inquire 
fully  why  this  is  so ;  it  is  only  necessary  to  inquire 
what  the  proper  limitations  of  the  practice  are. 
The  answer  is,  it  ceases  to  be  right  railroading 
when  the  short  haul  becomes  burdened  to  make 
the  long  haul  possible. 

All  transportation  starting  from  a  given  point 
should  bear  its  just,  its  reasonable,  and  perhaps 
its  equal  share  of  the  initial  charges  which  go 
before  the  actual  act  of  carriage  begins.  As 
every  one  knows,  these  expenses  are  very  heavy. 
To  some  extent,  they  depend  upon  one's  concep- 
tion of  where  a  carrier's  business  begins.  I  know 
of  no  very  persuasive  reason  why  it  may  not  be- 
gin with  the  prospective  passenger  at  his  abode 
and  with  prospective  freight  wherever  it  may  be. 
But  that  aside,  it  is  necessary  to  maintain  places, 
in  some  instances  vast  and  very  costly,  where  the 
subjects  of  traffic  may  be  accumulated  prior  to 
the  commencement  of  the  journey,  and  where 
the  facilities  of  transportation,  engines  and  cars, 

may    be    maintained    in    quantity    sufficient    to 
36 


402  An  American  Transportation  System 

answer  all  requirements.  Likewise,  at  the  end 
of  the  journey  like  places  and  facilities  must  be 
maintained  for  the  temporary  accommodation  of 
the  persons  and  property  carried.  Of  course  these 
places  and  facilities  subserve  both  ingoing  and 
outgoing  traffic.  Upon  their  proper  maintenance 
largely  depends  the  safety,  adequacy,  and  expedi- 
tion of  the  transportation  business.  To  handle 
this  business  in  its  temporary  stopping  places, 
requires  a  vast  army  of  employees.  Roughly 
speaking,  these  constitute  initial  and  terminal 
charges.  Now  it  is  obvious  that  these  first  charges 
on  transportation  are  exactly  as  heavy  on  freight 
that  is  to  be  carried  a  short  distance  as  on  freight 
that  is  to  be  carried  a  long  distance.  You  may 
say,  in  a  general  way,  that  all  these  charges  antici- 
pate the  getting  of  the  freight  or  passenger  into 
the  car.  It,  therefore,  seems  to  me  that  each  kind 
of  freight,  in  proportion  to  the  charges  for  carriage 
imposed  upon  it,  should  bear  its  proportion  of 
initial  and  terminal  charges,  no  matter  what 
distance  it  is  to  be  carried.  This  necessarily 
loads  a  short  haul  with  relatively  heavy  charges. 
But  it  is  only  just  and  no  one  should  complain  of 
justice. 

How  jar  may  a  railway  haul  freight  ? 

This  may  seem  a  curious  if,  indeed,  not  a  silly 
question.     Yet  I  cannot  doubt  that  there  is  a 


Constitutional  Amendment  Sought  4°3 

legitimate  limit  to  the  distance  that  some,  if  not 
all,  freight  may  be  carried,  and  that  the  failure  to 
regard  this  legitimate  limit  has  led  to  many  of  the 
abuses  with  which  the  railway  has  been  charged 
and  among  others,  to  some  extent,  the  short  and 
long  haul,  in  its  bad  aspect,  and  more  especially, 
the  unequal  distribution  of  railway  support  and 
the  discrimination  against  industries  in  different 
parts  of  the  country;  which  have  given  rise  to 
such  just  complaints,  and  the  attempted  read- 
justment of  which  constitutes  the  chief,  but  un- 
availing, occupation  of  the  Interstate  Commerce 
Commission. 

This  subject  was  lightly  touched  in  a  previous 
part  of  this  argument.  It  is  necessary  now  to 
consider  it  a  little  more  seriously.  The  business 
of  a  railway  may  be  roughly  divided  into  four 
classes:  illegitimate,  legitimate,  desirable,  and 
most  desirable.  The  cost  of  conducting  a  railway 
in  the  United  States  may  be  divided  into  four 
kinds  (and  there  can  never  be  less  than  three 
kinds  in  any  place  under  any  system) .  In  order 
to  give  these  names,  we  will  call  the  first  kind 
of  cost,  primary  cost,  that  is  the  actual  cost  of 
train  movement,  or  what  is  usually  termed,  in 
a  narrow  sense,  operating  expenses.  The  next 
kind  of  cost  we  will  call  secondary  cost,  or  the 
cost  of  maintaining  the  roadbeds  and  structures 
in  such  condition  that  trains  may  move  over 
them.     The  third  kind  of  cost  we  will,  without 


404  An  American  Transportation  System 

much  care  for  language,  but  only  to  give  it  a  name, 
call  tertiary  cost,  that  is  the  cost  of  money  bor- 
rowed to  make  the  railway  in  whole  or  in  part, 
the  fourth  kind  of  cost  we  will  call,  with  still  less 
propriety,  quaternary  cost,  that  is  the  cost  of 
money  sunk  in  the  railway  and  not  secured.  It 
is  represented  by  the  dividends  paid  on  stocks. 
Just  to  make  the  linguistic  job  complete,  we  will 
call  these  four  kinds  of  cost  the  quaternion  of 
railway  expenses. 

Now  you  have  a  railway  all  completed  and 
ready  to  do  business.  It  must  either  do  business 
or  it  must  quit.  And  if  it  is  to  be  a  real  railway, 
it  must  do  business  which  in  the  aggregate  will 
pay  the  quaternion  of  expenses.  But  this  is 
evident,  that  any  business  which  it  can  do  which 
will  more  than  pay  the  primary  cost,  will  produce 
a  profit,  however  slight,  which  may  be  turned 
over  as  a  contribution  to  the  payment  of  secondary 
cost,  or  the  cost  of  maintenance.  Likewise,  any 
business  which  it  can  do  which  will  more  than  pay 
both  primary  and  secondary  costs,  will  produce 
a  profit,  however  slight,  which  will  help  to  pay 
the  tertiary  cost,  or  the  interest  on  borrowed 
money.  Likewise,  any  business  which  it  may  do 
which  will  more  than  pay  primary,  secondary,  and 
tertiary  costs,  will  produce  a  profit  which  will 
help  to  pay  quaternary  cost  or  dividends.  It 
is,  therefore,  equally  obvious  that  any  business 
which  will  pay  something  more  than  primary  cost, 


Constitutional  Amendment  Sought  405 

is  legitimate  railway  business,  and  any  business 
which  will  not  pay  something  more  than  primary 
cost,  is  illegitimate  business.  Likewise,  business 
becomes  more  and  more  desirable,  according  as 
it  contributes  more  and  more  to  the  total  cost 
of  transportation. 

All  this  learning  of  the  philosophers  was  known 
equally  well  to  Adam  when  he  originally  engaged 
in  the  camel  transportation  business,  as  it  is  now 
known  to  the  most  illiterate  teamster,  to  wit: 
that  it  is  better  to  have  his  work  animals  doing 
something  at  a  price  which  will  provide  them  with 
grub,  than  to  have  them  standing  still  eating  their 
heads  off,  but  that  it  is  much  more  desirable  to 
have  business  which  will  put  profits  into  the 
bank. 

Applying  these  "principles"  to  the  question: 
How  far  a  railway  may  legitimately  haul  freight ; 
we  will  find  the  question  answered  by  another 
question:  Why  should  freight  be  hauled  at  all? 
And  the  simple  answer  to  this  is,  Because  it  is 
worth  more  at  the  end  of  its  journey,  than  it  was 
before  it  began  to  change  its  place.  Obviously, 
then,  if  the  freight  has  not  increased  in  value, 
the  transfer  was  without  profit  to  the  shipper. 
Equally  obviously,  if  the  cost  of  transportation 
to  the  carrier  was  greater  than  the  primary  cost, 
the  freight  has  been  carried  at  a  dead  loss  to  the 
carrier.  Obviously,  then,  legitimate  transporta- 
tion ceases  where  the  primary  cost  to  the  carrier 


406  An  American  Transportation  System 

crosses  the  line  of  increased  value  of  the  thing 
carried. 

Our  railways  have  not  always — I  might  say 
they  have  not  generally — acted  on  these  principles 
of  transportation.  Where  they  could  do  so  they 
have  sacrificed  the  short  haul  to  the  long  haul. 
They  have  carried  freight  long  distances  at  prices 
perilously  near  if  not  below  the  cost  of  turning 
the  wheels,  and  they  have  compelled  the  short 
haul  to  bear  the  burden  of  these  losses.  That  is, 
they  have  made  the  short  haul  provide  the  revenue 
to  pay  secondary,  tertiary,  and  quaternary  costs. 
That  this  is  wrong  the  railways  admit,  but  they 
say  they  are  helpless  to  correct  the  wrong  so  long 
as  they  are  compelled  to  work  under  competitive 
conditions;  that  is,  competition  between  them- 
selves and  with  water  transportation. 

There  is  a  sort  of  an  apology  for  the  wrong  of 
the  long  and  short  haul  offered  by  certain  learned 
writers.  While  admitting  the  injustice  to  the 
short  haul,  they  say  that  this  is  more  than  counter- 
balanced by  the  general  good  which  is  done  to 
the  country  at  large.  They  say  the  ability  given 
to  the  carrier  to  carry  goods  at  a  loss  over  long 
distances  has  served  to  open  up  our  remotest  nat- 
ural resources,  and,  they  say,  that  this  has  served 
to  keep  up  competition  among  the  producers  in 
widely  different  areas  and  at  greatly  different 
distances  from  points  where  consumption  is 
greatest.     For  instance,  they  say,  this  system  of 


Constitutional  Amendment  Sought  407 

charges  has  enabled  Chicago  to  get  pine  from  the 
forests  of  Wisconsin,  the  Pacific  Coast,  the  South- 
west, and  the  Southeast  at  practically  the  same 
price,  while  at  the  same  time  it  has  made  it  pos- 
sible for  these  remote  regions  to  find  markets 
for  their  lumber.  This  naturally  introduces  the 
second  aspect  of  "distance-charges,"  that  is,  the 
relative  charges  which  are  made  for  carrying 
the  same  commodity  different  distances  in  the 
same  or  different  directions,  in  the  United  States. 

Relative  ' '  distance-charges ' ' 

The  contention  of  the  American  railways  is, 
that  they  may  carry  freight  between  any  two 
points  however  distant,  at  as  low  a  rate  as  they 
may  deem  advisable,  and  that  they  may  charge 
whatever  rates  they  choose  between  any  two 
points  however  short  the  distance,  and  that  the 
latter  points  have  no  just  cause  of  complaint 
so  long  as  the  rates  charged  them  are  not  inher- 
ently unreasonable.  Boiled  down  this  contention 
amounts  to  this:  that  those  who  are  charged 
reasonable  rates  have  no  cause  to  complain  that 
others  are  charged  lower  rates.  This  contention 
does  not  apply  to  individuals  of  the  same  place, 
for  if  it  did  it  would  justify  the  giving  of  rebates ; 
but  it  applies  to  places,  cities,  districts,  and  whole 
portions  of  the  United  States.  The  result  of  this 
contention  is  that  the  railways  control  the  com- 


408  An  American  Transportation  System 

merce  of  the  United  States.  If  they  choose  to  do 
so,  they  may,  by  giving  low  rates,  build  up  one 
place,  or  one  locality,  or  one  district,  or  one  por- 
tion of  the  United  States,  while  holding  in  check 
any  other  place,  locality,  district,  or  portion  of 
the  country  by  the  imposition  upon  it  of  only 
inherently  reasonable  rates.  For,  other  things 
being  equal,  freight  rates  control  the  trade  of  the 
country. 

To  concretely  illustrate  this  railway  contention, 
I  may  say,  that  the  railways,  having  made  a  rea- 
sonable rate  from  New  York  to  St.  Louis,  claim 
that  St.  Louis  has  no  right  to  object  that  the 
same  rate  is  given  between  New  York  and  San 
Francisco.  Likewise  it  is  contended,  that  if  the 
rate  from  New  York  to  San  Francisco  is  reasonable, 
no  point  east  of  the  Missouri  river  can  complain, 
if  all  that  vast  territory  is  charged  exactly  the 
same  rate  to  San  Francisco  as  is  charged  from 
New  York.  Thus  New  York  as  a  purchasing 
point  for  the  Pacific  Coast,  is  put  upon  a  par  with 
every  other  trade  center  between  New  York  and 
the  Missouri  river,  notwithstanding  these  other 
points  may  be,  like  Chicago  iooo  miles,  or  St. 
Louis  1500  miles,  nearer  the  Pacific  Coast.  Thus 
the  railway  claims  the  right  to  annihilate  distance. 

But  while  the  rate  from  all  points  east  of  the 
Missouri  river  to  the  Pacific  Coast  is  equal,  there 
is  a  strip  of  territory  midway  between  the  Missouri 
river  and  San  Francisco,  where  the  rate  is  about 


Constitutional  Amendment  Sought  409 

three  times  the  total  rate  from  New  York  to  San 
Francisco.  From  this  high  point  of  rates  they 
slope  down  both  east  and  west.  This  may  be 
illustrated  by  the  following  curve. 


These  sorts  of  hill  and  low-level  freight  rates  are 
practically  characteristic  of  the  freight-rate  system 
of  the  United  States.  The  high  hill  rate  is  made 
by  adding  to  a  low  rate  between  terminals  the 
local  rate  back  from  the  nearest  terminal  to  the 
intermediate  point. 

One  more  practical  illustration  of  distance- 
charges  as  they  characterize  transportation  in  the 
United  States,  will  suffice  to  illustrate  the  injustice 
that  they  work.  About  half  the  salt  consumed 
in  the  country  is  made  from  brine  wells  located 
respectively  in  the  states  of  Michigan  and  Kan- 
sas, while  large  quantities  are  also  made  in  New 
York,  Louisiana,  Texas,  Utah,  and  the  valley  of 
the  Ohio.  Naturally,  you  would  think  that  all 
these  places  ought  to  have  such  chances  at  the 
salt  trade  as  nature  afforded  them,  or,  at  least, 
that  none  of  their  natural  advantages  would  be 
taken  from  them  by  railway  rates  much  more 
favorable  to  some  than  to  others.     Yet  I  find, 


41  o  An  American  Transportation  System 

from  a  case  decided  by  the  Interstate  Commerce 
Commission  in  1892,  that  the  railways  charged 
ten  cents  per  hundred  pounds  to  carry  salt  from 
the  Michigan  place  to  St.  Louis  which  was  611 
miles  distant,  and  that  they  charged  23^  cents 
per  hundred  pounds  for  carrying  salt  from  the 
Kansas  place  to  St.  Louis  which  is  575  miles  dis- 
tant. More  remarkable  still,  the  railways  charged 
15!  cents  per  hundred  pounds  for  shipping  salt 
from  the  Michigan  wells  to  a  town  in  Nebraska  a 
distance  of  504  miles,  and  19  cents  per  hundred 
pounds  for  shipping  it  from  Kansas  to  the  same 
town  distant  247  miles.  Instances  of  this  sort 
might  be  given  by  the  thousand  from  all  over  the 
United  States.     It  is  the  custom. 

The  constitution  of  the  United  States  granted 
to  congress  the  power  to  regulate  commerce  be- 
tween the  states,  but  congress  has  turned  its  job 
over  to  the  railways  with  the  added  power  to 
regulate  commerce  throughout  the  United  States. 
Where  the  railways  say  commerce  may  exist,  there 
it  exists;  where  they  say  it  shall  not  exist,  there 
it  does  not  exist;  where  they  let  it  just  barely 
exist,  there  it  just  barely  exists.  Moreover  the 
constitution  is  very  imperative  to  the  effect  that 
no  state  should  impose  any  obstacle  to  free  trade 
among  the  states,  and  at  the  same  time  limited  the 
federal  government  in  restricting  it;  but  what 
the  United  States  could  not  do  and  what  no  state 
could  do,  that  the  railways  can  do. 


Constitutional  Amendment  Sought  411 
What  principle  should  govern  distance-charges? 

Read  the  cases  that  come  before  the  Interstate 
Commerce  Commission  from  one  end  to  the  other, 
and  you  will  never  find  that  the  railway  companies 
justify  their  distance-charges  on  the  ground  that 
they  are  right  and  just.  Uniformly  they  have 
three  defenses:  (1)  they  are  compelled  to  the 
practices  by  water  competition;  (2)  they  are 
compelled  to  the  practices  by  competition  with 
each  other;  (3)  they  are  not  responsible  for  the 
existence  of  the  abuses,  because  the  disjointed, 
unco  -  ordinated  railways  and  railway  systems 
place  beyond  any  one  railway  or  system  of  rail- 
ways the  power  to  make  the  correction.  It  can 
only  be  done,  if  at  all,  by  united  action.  And  that 
the  laws  prohibit. 

If  we  are  to  have  a  right  solution  of  the  problem 
of  distance-charges,  we  must  find  it  in  some  better, 
broader,  and  more  just  principle  than  mere  selfish- 
ness, whether  this  selfishness  be  individual  or 
territorial.  Whatever  else  this  country  and  its 
government  stand  for,  this  principle  lies  at  their 
very  foundation,  that  over  its  broad  expanse,  no 
section,  however  small,  shall  be  deprived  of  its 
equal  right  of  self -development,  by  any  action  of 
the  national  government,  or  by  any  action  of  any 
state  government,  or  by  any  action,  under  the 
disguise  of  individual  enterprise,  which  is  tanta- 
mount to  governmental  action.     The  railway  is 


412  An  American  Transportation  System 

essentially  a  public,  governmental  institution;  as 
essentially  so  as  highways  themselves  are.  That 
which  the  government  cannot  do,  the  railways 
must  not  do.  The  government  is  forbidden  to 
discriminate  against  any  port  of  the  United  States 
by  any  preference  concerning  commerce.  Rate 
discrimination  against  a  place,  a  district,  or  a 
large  territory,  are  the  worst  forms  of  preferences. 
Railway  rates  may  be — have  been — made  which 
practically  stop  the  commercial  growth  and  de- 
velopment of  cities,  districts,  and  even  large  terri- 
torial expanses  of  this  country,  while  preferential 
rates  may  make  and  have  made  the  commercial 
development  of  cities,  districts,  and  even  large 
territories  at  the  expense  of  others.  Every  dis- 
criminatory rate  has  this  inevitable  tendency, 
and  the  discrimination  has  but  to  be  severe  enough 
to  completely  accomplish  the  result. 

The  greatest  problem  in  the  future  will  be,  as  the 
greatest  problem  in  the  past  has  been,  to  hold 
this  great  and  heterogeneous  country  together. 
This  is  not  essentially  a  government  by  force. 
It  is  essentially  a  government  based  on  the  iden- 
tity of  interest  of  all  its  territorial  parts.  Such 
identity  of  interest  is  preserved  in  two  ways, 
(i)  By  the  maintenance  of  absolutely  unrestrained 
commerce  throughout  the  length  and  breadth 
of  the  land.  (2)  By  the  inhibition  of  any  com- 
mercial discrimination  against  any  portion  of  the 
country  by  any  act  of  the  government  or  by  any 


Constitutional  Amendment  Sought  4*3 

quasi-governmental  agency.  Every  discrimina- 
tion against  any  part  of  the  country  is  a  disinte- 
grating factor.  And  the  discrimination  has  but 
to  affect  a  sufficiently  large  portion  of  the  coun- 
try to  start  the  mutterings  of  rebellion.  Either 
this  is  a  government  of  equal  justice  to  all  its 
citizens  and  to  all  its  territorial  parts,  or  it  is  no 
government. 

The  federal  congress,  seeing  the  rank  injustice 
of  railway  discrimination,  some  twenty  years 
back  passed  a  law  which  purported  to  measurably 
prohibit  discriminations  arising  from  distance- 
charges.  It  was  perhaps  the  most  remarkably 
misworded  act  which  ever  emanated  from  any 
legislative  body,  the  members  of  which  were 
capable  of  expressing  their  meaning  in  any  known 
language.  This  law  declared  it  unlawful  for  any 
interstate  carrier  "  to  give  any  undue  or  unreason- 
able preference  or  advantage  to  any  particular 
.  .  .  locality  .  .  .  in  any  respect  whatsoever. " 
And  it  declared  it  unlawful  for  such  carrier 

to  charge  or  receive  any  greater  compensation  in  the 
aggregate  for  the  transportation  of  passengers  or 
of  like  kind  of  property,  under  substantially  similar 
circumstances  and  conditions,  for  a  shorter  than 
for  a  longer  distance  over  the  same  line,  in  the  same 
direction,  the  shorter  being  included  within  the 
longer  distance;  but  this  shall  not  be  construed 
as  authorizing  any  common  carrier  within  the  terms 
of    this    act   to  charge   and   receive   as   great   com- 


4 1 4  An  American  Transportation  System 

pensation  for  a  shorter  as  for  a  longer  distance: 
Provided,  however,  That  upon  application  to  the 
Commission  appointed  under  the  provisions  of  this 
act,  such  common  carrier  may,  in  special  cases, 
after  investigation  by  the  Commission,  be  authorized 
to  charge  less  for  longer  than  for  shorter  distances 
for  the  transportation  of  passengers  or  property; 
and  the  Commission  may  from  time  to  time  pre- 
scribe the  extent  to  which  such  designated  common 
carrier  may  be  relieved  from  the  operation  of  this 
section  of  this  act. 

It  will  at  once  be  perceived  that  this  act  amoun- 
ted to  nothing,  and  it  is  doubtful  if  its  makers 
intended  that  it  should  amount  to  anything.  If 
they  intended  that  it  should  amount  to  anything, 
then  they  were  simply  hoodwinked.  But  it  would 
appear  most  likely  that  they  never  did  intend  it 
to  amount  to  anything,  because  they  have  never 
since  changed  it.  Indeed  it  is  not  unlikely  that 
the  more  intelligent  members  of  congress  knew 
full-well  that  no  law  could  be  made  which  under 
existing  railway  conditions  could  have  any  effect ; 
so  they  just  made  a  law  which  confirmed  the 
practices  which  had  been  forced  on  the  railways. 
For  the  railways  never  claimed  the  right  to  dis- 
criminate "under  substantially  similar  circum- 
stances and  conditions."  The  trouble  always 
has  been  and  yet  is,  that  the  "circumstances  and 
conditions"  were  never  "substantially  similar." 
They  were  always  made  dissimilar  by  three  cir- 


Constitutional  Amendment  Sought  415 

cumstances  and  conditions,  to  wit:  water  com- 
petition, inter-railway  competition,  and  inability 
of  one  railway  to  control  the  charges  of  another 
or  others. 

Of  course  the  Supreme  Court  made  short  work 
of  this  act,  relegating  it  to  the  waste  basket  where 
it  belonged.  Now  the  important  point  is  this: 
that  you  can  never  hope  to  do  away  with  dis- 
criminations arising  from  distance-charges,  until 
you  do  away  with  the  causes  which  justify  the 
discriminations;  that  is,  competition  of  the  kinds 
the  Supreme  Court  decided  justified  discriminations. 
Were  it  not  so  serious,  it  would  be  ludicrous  to  see 
congress  firing  its  blank-shotted  batteries  at  the  same 
time  against  railway  combinations  and  railway  dis- 
criminations. The  very  laws  which  prevent  com- 
binations of  necessity  perpetuate  discriminations. 
It  would  therefore  be  hopeless  to  attempt  to 
formulate  any  plan  to  eradicate  the  evils  and  in- 
justice of  railway  discriminations  against  localities 
under  present  conditions. 

But  if  we  had  a  transportation  system,  includ- 
ing both  water  and  rail  facilities,  then  I  think  a 
formula  could  be  presented  which  would  at  least 
meet  the  requirements  of  justice,  even  if  it  dis- 
pleased favored  places.  It  would  be  something 
like  this :  Throughout  the  United  States  in  whatever 
direction  transportation  is  employed,  the  aggregate 
charge  for  carrying  the  same  weight  of  the  same  kind 
of  freight  shall  be  the  same  for  equal  distances.     This 


4i 6  An  American  Transportation  System 

is  what  I  understand  by  the  phrase  requiring  the 
transportation  system  to  conduct  transportation 
"on  terms  of  uniformity  and  without  preference 
to  any  person. "  If  every  locality  in  this  country 
had  the  right  to  have  the  same  land  of  freight 
shipped  to  and  from  it,  the  same  distance,  for 
the  same  aggregate  charge,  it  is  difficult  to  discover 
how  any  could  complain  that  it  is  not  being  treated 
justly.  This  would,  of  course,  be  grossly  unjust 
to  the  railways  at  present,  but  if  there  is  any 
other  principle  which  results  in  fair  practices  to 
the  different  producing  communities  of  this  vast 
country,  I  fail  to  see  what  it  is.  It  would  doubt- 
less cut  the  profits  of  some  producing  centers  by 
limiting  their  fields,  but  the  railway  does  not 
exist  for  the  purpose  of  equalizing  fortunes.  It 
exists  to  impartially  serve  all.  As  before  said, 
there  is  not  an  argument  justifying  the  granting 
of  rebates  to  individual  shippers  which  is  not 
equally  fallacious  when  applied  to  the  granting 
of  specially  favorable  rates  to  localities,  for  these 
specially  favorable  rates  to  localities  are  but  spe- 
cially favorable  rates  granted  to  the  producers  of 
those  localities.  It  was  not  Bay  City,  Michigan, 
that  had  special  rates  on  salt  more  favorable  than 
the  Kansas  town:  it  was  the  manufacturers  of 
salt  that  had  the  special  favor. 

It  should  at  once  be  understood  that  the  formula 
above  mentioned  is  not  based  on  any  such  theory 
as  that  charges  should  increase  proportionately 


Constitutional  Amendment  Sought  417 

with  mileage ;  that  is,  that  the  charge  for  hauling 
400  miles  should  be  double  the  charge  for  hauling 
200  miles.  On  the  contrary,  you  may  work  the 
railway  to  any  legitimate  extent;  that  is,  until 
the  cost  of  carriage  crosses  the  increased  value 
of  the  freight  carried.  All  I  ask  is,  that,  however 
far  a  particular  kind  of  freight  is  to  be  carried  for 
an  aggregate  charge,  any  other  place  in  the  United 
States  may  have  the  benefit  of  the  railway  in  the 
carriage  of  the  same  kind  of  freight  the  same  dis- 
tance at  the  same  charge. 

As  will  be  perceived,  this  would  work  a  radical 
change  in  the  relation  between  production  and 
transportation.  At  present,  production  is  at  the 
mercy  of  transportation.  Under  the  proposed 
plan,  transportation  could  have  only  its  legitimate 
effect  upon  production,  and  that  effect  would  be 
perfectly  uniform.  Each  producer  would  have 
to  rest  on  his  own  merit;  none  could  bring  the 
railway  to  his  assistance  by  practically  making 
it  his  partner. 

How  uniform  rates  would  work 

At  the  present  time,  each  railway  and  each 
system  of  railways  claim  the  right  to  transport 
any  kind  of  freight  any  distance  at  any  rate  below 
the  maximun  fixed  by  law,  where  there  is  a  maxi- 
mum rate  established  by  law.  Likewise  each 
railway  or  system  claims  the  right  to  charge  such 

*7 


4i 8  An  American  Transportation  System 

rates  as  it  finds  it  necessary  to  charge  to  terminals 
having  water  or  railway  competition,  and  to  charge 
intermediate  points  the  aggregate  through  rate 
and  the  return  local  rate.  Likewise,  each  railway, 
either  by  itself  or  in  joint  operation  with  other 
railways,  claims  the  right  to  charge  different  pro- 
ducing centers  the  same  rates  for  carrying  the  same 
kind  of  freight  different  distances,  even  though  the 
different  distances  may  be  as  much  as  500  or 
1000  or  1500  miles,  the  practical  effect  of  which 
is  to  deprive  the  nearest  producing  center  of  any 
advantage  by  reason  of  its  geographical  situation. 

Likewise,  each  and  every  producing  center 
claims  that  it  has  the  right  to  have  all  freight 
rates  to  and  from  it  equalized  with  every  other 
producing  center.  Likewise,  the  Interstate  Com- 
merce Commission,  having  of  necessity  surrendered 
its  claim  to  overthrow  discriminations  arising 
out  of  the  long  and  short  haul,  is  now  devoting 
its  attention  to  the  equalizing  of  rates  among 
producing  centers. 

Thus  it  will  be  seen  that  the  theory  of  ' '  equalized 
rates"  is  placed  squarely  in  issue  with  the  theory 
of  "uniform  rates."  At  present  the  railway  has 
been  reduced  to  a  mere  adjunct  of  production. 
It  is  worked  solely  in  the  interest  of  producing 
centers.  The  rights  of  the  consumers  are  never 
for  a  moment  taken  into  consideration.  Once 
in  a  while,  you  will,  indeed,  notice  in  the  decisions 
of  the  Commission,  a  vague  sort  of  a  thought 


Constitutional  Amendment  Sought  419 

floating  past  the  minds  of  the  commissioners  that 
there  is  such  a  class  of  people  in  this  country  as 
consumers.  But  they  are  never  represented  be- 
fore the  Commission.  Always  the  parties  before 
the  Commission  are  the  jobbers,  the  manufac- 
turers, and  the  railways.  Between  these  three 
the  consumer  is  ground  up.  Take,  for  example, 
the  Transcontinental  Freight  Rates'  Case.  Here 
all  producing  centers  east  of  the  Missouri  were 
carefully  protected  by  equalizing  their  rates  to  the 
Pacific  Coast  terminals  (mainly  Seattle,  Portland, 
San  Francisco,  Sacramento,  and  Los  Angeles), 
while  the  jobbers  of  these  places  were  avow- 
edly given  a  monopoly  of  all  Pacific  Coast  trade. 
But  the  fact  that  this  equalization  of  rates  com- 
pelled every  consumer  between  the  Missouri  river 
and  the  Pacific  Coast  to  pay  from  one  and  a  half 
to  three  times  the  rate  he  should  have  paid,  is  an 
insignificant  fact  worthy  of  only  a  passing  thought. 
If  the  people  of  that  vast  region  were  not  the  best- 
natured  and  most  patriotic  people  in  the  United 
States,  they  would  have  caused  the  stones  to 
mutiny.  Apply  the  same  principle  to  New  Eng- 
land and  there  would  be  another  tea  party  in 
forty-eight  hours. 

And  note  that  ilw  sole  and  only  excuse,  apology, 
or  justification  advanced  by  either  the  railways  or 
by  the  Commission  for  this  monstrous  injustice,  is 
the  fact  that  the  transcontinental  railways  are 
threatened  by  water  competition. 


42 o  An  American  Transportation  System 

Now  note  the  difference  if  the  "circumstances 
and  conditions"  had  been  such  as  to  justify 
uniform  instead  of  equalized  rates;  that  is,  if 
water  and  rail  transportation  had  been  unified. 
The  Pacific  Coast  ports  would  have  shipped  such 
goods  as  would  naturally  come  to  them  by  water 
at  low  water  rates,  and  under  uniform  railroad 
rates  those  goods  would  naturally  have  radiated 
from  Pacific  Coast  ports  until  they  met  the  point 
where  transportation  of  the  same  goods  by  rail 
from  the  east  crossed  the  line  of  increased  value 
of  the  freight  received  for  transportation.  At 
the  same  time  the  business  of  St.  Louis,  Omaha, 
Kansas  City,  etc.,  would  have  reached  well  into 
or  overlapped  the  territory  naturally  tributary 
to  San  Francisco.  Chicago  would  have  overlapped 
St.  Louis  and  Omaha,  and  the  entire  region 
from  the  Missouri  river  to  the  Pacific  Coast  would 
have  been  served  by  rates  of  one  half  at  least 
what  they  are  now.  At  least,  whatever  rate 
would  result  would  be  a  just  rate,  and  no  man  can 
complain  of  justice  however  heavily  the  burden 
falls  upon  him.  Thus  under  uniform  rates  there 
would  be  a  constant  overlapping  of  circles  radiat- 
ing from  each  producing  center,  and  whatever 
else  would  happen,  this  at  least  would  be  true; 
that  no  place  could  complain  of  anything  except 
that  its  geographical  position  did  not  place  it  an 
equal  distance  from  every  other  place  in  the 
United  States.     This  is  what  I  mean  by  making 


Constitutional  Amendment  Sought  421 

transportation  the  equal  servant  instead  of  the 
master  of  man.  But  this  it  is  impossible  it  should 
ever  be,  until  all  the  facilities  of  transportation 
are  organized  into  an  harmoniously  working 
entity. 

I  have  frequently  referred  to  the  first  principle 
of  railroading  as  carried  on  in  this  country,  as  the 
principle  of  "getting  and  doing  business."  As 
an  old  traffic  manager  once  expressed  it:  "My 
boss  taught  me  early  that  I  could  get  business 
or  get  out.  And,"  he  added  laconically,  "I  got 
it.  I  would  n't  care  to  tell  you  all  the  ways  by 
which  I  got  it,  but  I  got  it  and  no  receiver  ever 
collected  any  of  our  tolls. "  1  trust  I  have  made 
sufficiently  plain  my  notion  of  the  extent  to  which 
a  railway  may  legitimately  carry  freight.  But 
I  am  satisfied  that  there  is  an  enormous  waste 
from  the  excessive  carriage  of  freight  in  this 
country,  and  that  this  loss  falls  on  the  consumer. 
Perhaps  I  may  make  this  plain  by  recounting 
one  of  the  innumerable  anecdotes  told  me  by  the 
aforesaid  traffic  manager  concerning  his  "boss," 
who  was  one  of  the  greatest  railroad  men  in  the 
United  States.  He  said:  "The  old  man  never 
wanted  to  see  a  factory  at  the  place  where  the 
raw  material  was  produced.  He  wanted  to  haul 
the  raw  material  to  just  as  distant  a  manufactory 
as  possible.  That  gave  us  haul  No.  1.  Then  he 
wanted  to  haul  the  manufactured  goods  to  large 
wholesale  places  just  as  far  away  as  possible. 


422  An  American  Transportation  System 

That  was  haul  No.  2.  Then  he  wanted  to  haul 
the  same  freight  from  the  wholesale  places  to  the 
retail  distributing  points.  That  was  haul  No.  3. 
We  could  n't  get  any  more  out  of  the  freight 
unless  we  stole  it. "  Which  tends  to  illustrate 
the  theory  herein  presented,  that  the  railway 
exists  for  the  country,  not  the  country  for  the 
railway. 

Nor  should  the  fact  be  overlooked,  that  what 
has  been  herein  said  is  applicable  to  the  establish- 
ment of  a  transportation  system  for  the  United 
States.  Even  if  we  did  away  with  competition 
ourselves,  we  would  still  have  certain  foreign 
transportation  to  compete  with.  I  suppose  the 
Canadian  railways  could  be  induced  to  play  fair. 
If  not,  I  suppose  we  could  compel  them. 

IX.    Classification  of  Traffic 

In  the  last  section  an  attempt  was  made  to 
bring  forward  rather  prominently  two  ideas  con- 
cerning transportation.  The  first  was  that  in- 
stead of  being  a  dominating  element  or  force  in 
American  life,  it  should  be  a  serving  element  or 
force ;  the  second  that  it  should  operate  as  a  force 
tending  to  integrate  or  hold  together  the  different 
parts  of  the  country,  instead  of  a  force  tending 
to  disintegrate  or  divide  the  country  up  into 
sections.  The  conclusion  reached  was  that  to 
prevent  any  part  of  the  country  having  any  just 


Constitutional  Amendment  Sought  423 

cause  of  complaint  against  any  other  part,  or  any 
locality  against  any  other  locality,  rates  should 
be  uniform  throughout  the  entire  country,  and 
that  this  end  could  be  attained  only  by  unifying 
all  transportation  facilities. 

These  ideas  are  now  to  be  brought  still  more 
prominently  into  view.  If  I  may  be  allowed  to 
paraphrase  a  great  saying,  we  are  to  see  that 
man  was  not  made  for  the  railroad  but  the  rail- 
road for  man.  Producer,  trader,  and  consumer 
are  all  to  be  impartially  served,  subject  to  the 
fundamental  maxim,  that  the  only  excuse  for 
transportation  is  that  it  serves  the  welfare  of  man. 
Transportation  is  no  longer  to  be  viewed  from 
the  standpoint  of  the  railway  corporation,  but 
from  the  standpoint  of  the  users  of  the  railway — 
the  public.  The  investors  in  the  means  of  trans- 
portation having  been  fully,  fairly,  and  securely 
provided  for,  the  question  is,  how  can  the  public 
make  the  best  use  of  those  facilities. 

In  the  view  of  the  writer,  this  aspect  of  the 
transportation  problem  does  not  graduate  into 
either  socialism  or  governmental  ownership. 
There  is  a  vast  difference  between  socialism  and 
"mutualism,"  and  there  is  a  still  wider  difference 
between  governmental  ownership  and  govern- 
mental control  of  transportation  as  outlined 
herein, — differences  wide  in  their  inception,  wider 
still  in  their  practical  operation,  widest  of  all 
in  their  final  effects. 


424  An  American  Transportation  System 

Every  one,  of  course,  knows  that,  if  he  is 
willing  to  ride  in  a  "tourist"  car,  he  can  cross  the 
continent  for  about  one  half  what  it  will  cost  him 
if  he  rides  in  a  first-class  "Pullman, "  and  that,  if 
he  chooses  to  ride  in  a  "day"  coach,  he  can  save 
the  dollar  or  two  that  he  will  be  asked  to  pay  if 
he  rides  in  a  "parlor"  car.  Everybody  also 
knows,  that  a  carload  of  coal,  sand,  building 
stone,  cement,  etc.,  may  be  shipped  for  a  fraction 
of  what  it  costs  to  ship  a  car  load  of  dry  goods 
or  other  manufactured  articles.  Every  one  who 
has  thought  on  the  subject,  has,  of  course,  been 
struck  by  the  fact  that  it  does  not  cost  the  railroad 
twice  as  much  to  carry  a  passenger  in  a  Pullman 
as  in  a  tourist  car,  for  these  two  cars  are  frequently 
a  part  of  the  same  train  and  are  subject  to  practi- 
cally the  same  costs  to  the  company.  But  this 
fact  is  much  accentuated  when  one  thinks  of  it 
in  relation  to  freight  charges.  One  would  natur- 
ally think  the  extra  weight  of  a  train  made  up  of 
the  same  number  of  cars,  rilled  with  coal,  would 
cost  the  railroad  more  to  move  than  it  would  a 
like  train,  the  cars  of  which  were  rilled  with  ex- 
pensive dress  goods;  yet  the  company  would 
charge  a  hundred  or  maybe  a  thousand  times 
as  much  to  carry  the  train  of  merchandise 
as  the  train  of  coal.  The  first  thing  then, 
that  strikes  a  person  as  peculiar  in  the  rail- 
road business  is,  that  its  charges  for  various 
classes  of  service  do  not  bear  any  marked  rela- 


Constitutional  Amendment  Sought  425 

tion  to  the  relative  cost  to  it  of  performing 
those  services. 

Now,  if  I  were  to  write  a  hundred  pages  on  the 
why  and  wherefore  of  these  seeming  anomalies  in 
the  railroad  business,  it  would  be  found  in  the 
end  that  they  are  all  explained  by  the  simple 
commonplace  of  the  necessity  of  the  railroad  to 
"get  business."  If  it  charged  the  same  rate  per 
ton  for  hauling  coal  as  for  hauling  silk,  the  coal 
would  simply  lie  in  the  ground,  while  the  amount 
of  silk  carried  would  not  very  greatly  increase. 
Wise  old  railroad  men!  They  said:  "Let  us 
classify  freight.  Let  us  charge  on  each  class 
what  it  can  pay.  Let  us  make  everything  move. 
Let  us  see  if  we  can  make  as  much,  or  more,  if  we 
charge  some  commodities  very  light  rates  and 
others  very  heavy. "  Behold,  how  business  makes 
business!  Low  rates  on  coal  opened  up  the  coal 
fields.  Low  rates  on  iron  ores  opened  up  the 
iron  mines.  Low  rates  on  both  assembled  the 
two,  and  the  monumental  steel  business  of  the 
United  States  followed.  Result!  more  business 
of  a  paying  class  for  the  railroads. 

There  are  two  things  to  which  attention  is  here 
especially  directed.  The  first  is,  how  the  railroads, 
in  serving  their  own  interests,  wrought  a  great 
service  to  mankind.  Far  be  it  from  me  to  accuse 
the  awful  railroad  corporations  of  philanthropic 
motives.  They  would  be  the  last  to  claim  them. 
The  service  to  mankind  was  an  incident.     But  it 


426  An  American  Transportation  System 

is  a  suggestive  incident  nevertheless.  The  second 
is,  that  transportation  charges  which  are  imme- 
diately perilously  near  the  losing  point,  may 
ultimate  into  very  remunerative  carriage.  Under 
our  past  disjointed  railways,  this  principle  has 
not  had  full  play;  for  no  company  was  especially 
interested  in  carrying  freight  at  or  near  the  losing 
point,  only  to  furnish  profitable  freight  to  another 
road.  It  will  be  obvious  that  if  all  transportation 
facilities  were  unified  so  that  ultimate  profits 
redounded  to  the  entire  system,  the  principle 
would  have  full  play  and  much  new  business 
would  be  developed. 

About  all  the  suggestions  which  I  have  to  make 
on  the  subject  of  the  classification  of  railway 
services  are  based  on  further  extensions  of  the 
two  ideas  above  noted,  except  that  we  should 
face  about  so  that  instead  of  being  an  incident 
of  railroad  business,  the  service  to  man  should  be 
recognized  as  the  primary  factor  in  the  differentia- 
tion of  charges.  It  is  not  to  be  disguised  that  the 
ethical  and  business  aspects  of  transportation 
here  join  hands.  But  rest  assured  that  the  rail- 
road companies  have  in  their  desire  to  "get  busi- 
ness" already  brought  these  two  aspects  of 
transportation  close  together.  Their  classifications 
have  been  based  on  the  assumption  that  they 
would  result  in  the  greatest  possible  movement  of 
trade,  and  he  would  be  a  bold  thinker,  indeed, 
who  would  propose  any  theoretical  test  as  against 


Constitutional  Amendment  Sought  427 

the  test  of  years  of  actual  experience.  Expected 
benefits  might  be  looked  for  in  the  results  following 
the  unification  of  all  means  of  transportation, 
rather  than  in  any  radical  rearrangement  of  the 
respective  burdens  which  each  class  of  freight  has 
borne. 

Suppose  it  were  possible  to  imagine  a  society 
which  chose  to  use  its  transportation  facilities 
primarily  in  the  interests  of  its  people.  What 
would  be  its  attitude  toward  those  facilities? 
"First,"  it  would  say,  "the  aggregate  amount 
raised  should  be  ample  to  support  the  means 
of  transportation.  Second,  that  this  aggregate 
amount  should  be  apportioned  among  the  various 
commodities  carried,  so  that  the  least  burden  of 
charges  should  fall  upon  the  absolute  necessities 
of  man."  For  the  economists  all  tell  us  that  a 
nation  cannot  be  great  and  prosperous  whose 
people  have  not  the  possibility  of  obtaining  the 
absolute  necessities  of  life  within  the  limits  of  a 
reasonable  expenditure  of  their  energies.  These 
absolute  necessities  of  life  are  the  foods  upon 
which  our  bodies  are  sustained  and  the  substances 
by  which  our  bodies  are  protected  against  the 
elements.  All  other  substances  produced,  or 
transported,  sustain,  with  respect  to  these  abso- 
lute necessities,  an  ever  ascending  scale  of  lessening 
life  importance,  until  articles  are  reached  recog- 
nized by  all  distinctively  as  luxuries.  Not  only 
are  we  able  to  see  that  all  classes  of  production 


428  An  American  Transportation  System 

conform  in  a  general  way  to  this  ascending  series, 
but  also  that  each  class  has  its  own  ascending 
scale.  At  the  base  of  the  general  series  are  found 
the  groups  of  cereals  and  meats,  the  fuels,  wood 
and  coal,  the  building  material  of  the  primitive 
character,  the  coarse  wearing  apparel  of  the 
poorer  classes,  the  necessary  household  table  and 
kitchen  furniture  and  utensils.  We  recognize 
quickly  that  each  of  these  groups  has  its  own 
scale.  Wheat,  corn,  oats,  rye,  etc. ,  are  extremely 
useful  in  their  raw  state  for  cattle  and,  to  a  less 
degree,  for  man.  Refined  into  flour  of  various 
grades,  they  "ascend"  until  there  is  reached  the 
delicate  luxury  of  the  four-o'clock  tea  table.  It 
is  so  with  all  building  materials,  from  the  cheapest 
kind  of  lumber  to  the  most  luxurious  hard  wood ; 
from  plain  hardware  to  the  most  exquisite  pro- 
ducts of  our  factories;  from  raw  silk,  flax,  wool 
and  cotton  to  the  finest  products  of  the  looms. 
It  would  serve  no  purpose  to  tabulate  these. 
What  should  be  observed  is,  that  with  this 
ever  ascending  scale  from  necessity  to  luxury, 
has  gone  an  ascending  scale  of  values. 

The  question  is  whether,  from  the  standpoint 
of  the  people,  this  combined  ascending  scale  of 
life-necessities  and  values,  or,  putting  it  other- 
wise, of  comparative  life-necessities  in  relation  to 
values,  with  corresponding  elements  of  compara- 
tive weight,  bulk,  etc.,  should  constitute  the  basis 
for  the  classification  of  freights?     Of  course  the 


Constitutional  Amendment  Sought  429 

most  obvious  objection  to  it  is  the  apparent  diffi- 
culty of  always  drawing  nice  distinctions.  Those 
whose  minds  are  so  constituted  that  they  always 
overlook  the  essential  in  view  of  the  exceptional, 
and  especially  that  peculiar  biped  whose  ambition 
in  life  it  is  to  see  its  ridiculous  phases,  will  at 
once  inquire  whether  the  tail  of  the  ox,  which 
makes  good  soup,  or  the  horns,  which  make  buttons, 
or  the  hoofs,  which  make  the  nasty  stuff  called 
gelatin  (as  I  have  been  told),  is  to  be  regarded 
as  most  important  ?  Objections  of  this  kind  need 
not  worry  us  much;  for  we  observe  that  oi.  the 
nearly  ten  thousand  articles  now  carried  by  rail- 
ways, some  seven  thousand  have  not  as  yet  been 
found  to  fall  into  any  recognized  classification, 
and  it  would  not  be  surprising  if  any  suggested 
classification  would  require  the  shipment  of  con- 
siderable freight  as  "commodity."  Meantime  it 
may  be  said  that  if  this  entire  list  of  ten  thousand 
articles  were  laid  before  a  person  of  ordinary 
intelligence,  he  would  be  able  very  quickly  to 
specify  those  upon  which  human  life  principally 
depends,  and  he  could  make  a  very  fair  attempt 
to  ascend  the  scale  until  the  region  of  luxury  was 
reached.  If,  in  addition,  he  had  the  benefit  of  a 
scale  of  values  based  on  certain  standards  of 
measures,  weights,  and  bulks,  he  would  not  be 
long  in  getting  most  articles  into  their  appropriate 
groups  for  the  purpose  of  grading  the  rates  they 
should  pay. 


43°  An  American  Transportation  System 

So  far  as  the  subject  of  transportation  rates  is 
concerned,  the  views  outlined  herein  may  be 
summed  up  as  follows:  reasonable  and  fair  rates 
are  such  as,  when  applied  to  the  whole  system, 
will  produce  a  reasonable  and  fair  return  upon 
the  capital  honestly  invested  in  the  system; 
the  aggregate  amount  to  be*  raised  should  be 
raised  by  rates  which  are  lowest  on  the  absolute 
necessities  of  life  and  highest  on  luxuries,  relative 
values  being  taken  into  consideration ;  the  charges 
should  be  the  same  on  the  same  commodity  for 
equal  distances  in  all  directions,  and  should  in- 
crease as  the  distance  increases  according  to  the 
capacity  of  the  freight  to  bear  the  charge,  until 
the  cost  of  carriage  crosses  the  capacity  of  the 
freight  to  bear  the  charge,  at  which  point  legiti- 
mate traffic  ceases. 

So  far  as  passenger  traffic  is  concerned,  but 
little  has  been  said,  because  it  is  rapidly  adjusting 
itself  with  the  elimination  of  competition.  There 
can  be  no  objections  to  such  classification  of  the 
passenger  service  as  has  prevailed.  Commutation 
service  is  a  class  quite  by  itself,  and  if  it  were  not 
justified  on  grounds  of  public  policy — the  relief 
of  the  congested  life  of  large  cities — it  would  be 
justified  by  its  peculiar  nature.  But  care  should 
be  taken  that  no  discrimination  be  shown  against 
different  suburban  districts. 


Constitutional  Amendment  Sought  431 

X.    The  Transportation  System  and  the 
Court 

The  government  and  the  transportation  system 

It  will  be  observed  that  the  government,  neither 
national  nor  state,  has  much  to  do  with  my 
transportation  system.  The  primary  purpose  of 
the  whole  scheme  being  to  take  the  railway  out 
of  politics  and  to  keep  it  out,  and  having  taken 
great  pains  to  have  its  rights,  duties,  and  obliga- 
tions defined  by  the  supreme  legislative  act  of 
the  people,  it  is  not  likely  that  I  should  have  left 
it  in  a  position  where  it  is  necessary  to  keep  its 
lobby  in  the  legislative  halls,  its  hirelings  in  con- 
gress, the  legislatures,  and  on  the  benches,  or 
where  politicians  could  be  elected  to  office  to 
thrive  off  it  by  blackmail. 

Neither  has  it  been  left  as  a  corporation  whose 
trustees  may  fail  in  responsibility,  or  obedience, 
to  the  laws  of  its  creation.  The  government  may 
have  a  Secretary  of  Transportation,  if  it  thinks 
its  dignity  will  be  thereby  enhanced,  and  it  may 
have  as  many  more  political  nosers  as  it  chooses, 
so  long  as  they  have  nothing  to  do  with  the  actual 
operation  of  the  system  and  no  chance  to  get 
their  itching  palms  on  its  finances.  And  it  may 
have  as  many  sleuths  as  it  cares  to  employ  to  see 
that  no  one  but  themselves  go  wrong.  Personally, 
what  I  want  is  a  court,  which  shall  see  that  these 


43 2  An  American  Transportation  System 

trustees  are  held  responsible,  just  as  any  other 
trustees  are,  for  the  strict  fulfilment  of  their 
great  trust. 

Hence  while  leaving  it  to  the  trustees  to  conduct 
the  affairs  of  their  corporation,  as  any  other  trus- 
tees should  and  as  the  directors  of  railways  are 
supposed  to  do  at  present,  I  took  the  liberty, 
while  arranging  everything  else,  incidentally  to 
provide  for  a  court  with  original,  exclusive,  and 
final  jurisdiction,  to  hear  and  determine  the  fol- 
lowing matters : 

i.  The  gross  amount  required  to  be  raised 
by  freights  and  fares  to  support  the  transportation 
system,  including  the  payment  of  dividends  and 
the  establishment  of  a  suitable  surplus,  and  the 
distribution  of  the  burden  thus  created  over  the 
different  classes  of  service  performed;  that  is, 
the  classification  of  passenger  and  freight  service. 

2.  To  hear  any  questions  which  might  be 
presented  by  any  one  complaining  that  the  system 
was  not  being  operated  in  any  particular  accord- 
ing to  the  law,  and,  on  complaint,  or  of  its  own 
motion,  to  correct  any  discriminatory  practices. 

3.  To  hear  petitions  by  the  board  of  directors, 
or  by  any  community,  for  the  construction  of 
new,  or  additional  roads,  to  make  the  system 
safe  and  adequate. 

4.  To  audit  the  accounts  of  the  trustees,  to 
judicially  approve  or  disapprove  all  contracts 
for  the  construction  of  permanent  improvements, 


Constitutional  Amendment  Sought  433 

and  to  order  the  issuance  and  sale  of  additional 
stock  to  pay  for  the  same. 

5.  To  act  as  a  court  of  arbitration  between 
the  corporation  and  its  employees. 

All  these  functions  of  the  court  are  so  obvious 
that  only  the  last  requires  special  mention. 

In  no  direction  does  the  transportation  system 
owe  greater  obligations  than  to  its  employees. 
These  obligations  being  fulfilled,  the  duty  which 
the  employees  owe  to  the  public  and  the  corpora- 
tion should  be  rigorously  enforced.  The  corpora- 
tion owes  it  to  its  employees  that  they  be  paid 
fair  wages,  have  the  safest  appliances  with  which 
to  work,  and  that  they  be  not  required  or  allowed 
to  work  more  than  reasonable  hours.  This  being 
so,  negligence  and  disobedience  of  lawful  require- 
ments by  employees,  endangering  not  only  their 
own  lives  but  those  of  the  public,  should  be 
punished. 

There  could  be  no  greater  disaster  to  the  country 
than  a  general  railway  strike.  The  right  to  work, 
or  not  to  work,  is  the  inherent  right  of  every 
American.  The  right  of  those  who  labor  to  or- 
ganize for  their  protection  is  a  right,  the  exercise 
of  which  should  be  encouraged.  But  there  can 
be  no  such  thing  as  a  right  to  bring  about  a  general 
strike  which  will  paralyze  the  whole  country  as 
much  as  a  war,  provided  there  is  an  impartial 
tribunal  to  which  grievances  may  be  submitted. 
It  is  for  these  reasons  that  I  have  thought  juris- 
38 


434  An  American  Transportation  System 

diction  should  be  conferred  on  the  court  to  act  as 
a  court  of  arbitration  between  the  corporation 
and  its  employees.  In  as  much  as  railway  em- 
ployees and  their  families  represent  a  twelfth  of 
the  population  of  this  country,  and  in  as  much 
as  the  employment  in  which  they  are  engaged 
involves  the  interests  and  welfare  of  the  whole 
country,  the  court  that  stands  as  arbitrator  be- 
tween the  twelfth  of  the  people  and  the  rest  of 
the  public  performs  an  important  function  indeed. 
This  important  duty  should  not  be  left  to  any 
board  of  political  appointees,  but  to  a  court  which 
may  hear  and  judicially  determine,  and  having 
heard  and  judicially  determined,  possesses  the 
power  and  authority  to  fearlessly  execute  its 
decrees. 

Doubtless  it  will  be  said  that  this  reduces  the 
duties  of  the  board  of  directors  to  the  mechanical 
business  of  running  trains.  And  when  one  thinks 
about  the  matter  seriously,  what,  after  all,  is 
transportation  more  or  less  than  the  moving  of 
trains  and  other  appliances  whereby  we  and  our 
goods,  wares  and  merchandise  may  be  carried  in 
safety  with  due  expedition?  Who  was  it,  I 
wonder,  who  first  determined  that  it  should  be 
the  prime  duty  of  a  railway  manager  to  manipu- 
late the  stock  market  ?  And  as  for  their  wonderful 
enterprise  in  opening  up  new  territories,  or  new 
industries,  who  is  there  that  does  not  know  that 
they  must  be  approached  on  bended  knees,  even 


Constitutional  Amendment  Sought  435 

to  grant  an  audience  to  the  real  promoters  ?  True, 
in  the  past  they  have  shown  much  skill  in  pur- 
chasing one  another's  roads  and  their  securities, 
and  in  making  connections,  consolidations,  mer- 
gers, leases,  and  the  like.  But  their  ability  in 
that  direction  would  no  longer  be  required,  were 
their  roads  organized  into  one  transportation 
system.  What  they  have  been  trying  to  do 
contrary  to  the  law  may  here  be  done  for  them 
in  accordance  with  the  law.  It  will  be  interesting 
to  know  whether  their  consolidations  have  been 
in  the  interest  of  the  country,  or  in  their  own 
interests,  and  whether  they  would  approve  of  a 
plan  to  make  the  consolidation  complete.  Hardly, 
I  imagine ;  it  would  deprive  many  of  them  of  most 
lucrative  employment,  not  to  mention  opportuni- 
ties closed  to  them  forever. 

Yes,  it  may  be  admitted  that  the  attempt  has 
been  made  to  make  an  automatic  transportation 
system.  Its  capitalization  shall  balance  its  value; 
its  freights  and  fares  shall  compensate  its  expendi- 
tures; its  securities  shall  be  stable  and  have 
incomes  equal  to  the  value  of  money;  its  opera- 
lions  shall  be  without  fear  or  favor — it  would  be 
nothing  but  a  transportation  system.  But,  O  you 
politicians,  where  would  your  occupation  be? 
And,  0  you  blatherskites,  where  would  you  get 
your  blather?  And,  O  you  in  high  places,  what 
would  you  fulminate  about?  And,  you  syndica- 
tors  and   underwriters   and  pawn-brokers,  what 


43 6  An  American  Transportation  System 

would  become  of  your  profits?  And,  you  wash- 
salers,  who  sell  the  entire  capital  of  Reading,  for 
instance,  one  hundred  times  over  in  one  year, 
what  would  you  do? 

I  admit  that  a  transportation  system  which  had 
no  business  but  just  to  transport  the  people  of  this 
country  and  their  goods,  presents  unpleasant 
prospects  in  sundry  directions.  But  most  of  us 
could  stand  them. 

Under  such  an  automatic  transportation  system, 
what  a  host  of  knotty  railway  problems  would  at 
once  disappear.  I  refer  not  only  to  the  financial 
questions  which  are  forever  killing  our  railway 
presidents  by  apoplexy  and  heart  disease.  Even 
our  old  friend,  the  traffic  manager,  would  have 
nothing  to  do  but  work  out  an  equilibrium  of 
rates  which  would  support  the  system;  which 
being  established  on  the  principles  of  justice  could 
with  equal  justice  move  up  or  down  as  circum- 
stances would  require.  Moreover  any  man  having 
anything  to  ship  any  distance,  would  know  just 
what  it  would  cost.  I  should  think  that  under 
such  a  system  the  traffic  manager  would  not  have 
to  have  his  rate  clerk  by  him,  as  now,  in  order  to 
tell  what  rates  could  be  given.  And  as  for  our 
present  system  of  car  exchanges,  charges  for, 
and  repairs  of,  foreign  cars ;  all  that  would  disap- 
pear when  all  cars  were  owned  and  repaired  by 
one  company.  More  than  half  the  book-keeping 
now  required  of  the  railways  would,  of  course, 


Constitutional  Amendment  Sought  437 

be  obsolete.  Nor,  to  jump  from  one  thing  to 
another,  can  it  be  doubted  that  the  consolidation 
of  terminals,  stations,  yards,  etc.,  would  greatly 
expedite  business  and  free  the  patrons  of  the 
railway  of  a  thousand  annoyances  now  suffered. 
Economies  would  be  found  everywhere. 

If,  therefore,  what  is  objected  to  is  the  automatic 
working  of  such  a  transportation  system,  then  I 
call  your  attention  to  the  fact  that  the  most 
perfectly  organized  organisms  of  which  we  know 
are  those  the  parts  of  which  automatically  per- 
form all  their  functions. 

XI.    Taxation  of  Transportation  under 
Suggested  Plan 

One  of  the  just  complaints  of  the  people  against 
the  present  railway  system  is,  that  it  does 
not  bear  its  just  share  of  the  burdens  of  taxation. 
In  the  year  1906,  the  railways  paid,  in  round 
numbers,  $68,000,000  in  taxes.  At  the  same 
time  they  claimed  their  assets  to  be  worth  $1 7,534,- 
000,000.  As  the  average  tax  rate  in  the  states 
and  counties  in  which  the  physical  property  of 
the  railways  lay,  must  have  been  over  rather  than 
under  1%,  it  is  obvious  either  that  the  assets 
have  been  much  over-valued  by  the  railroads 
in  their  reports,  or  much  under- valued  for  taxation 
purposes;  for  if  their  report-value  is  correct,  they 
should  have  paid  at  least  $175,000,000  in  taxes, 


43 8  An  American  Transportation  System 

or  nearly  three  times  as  much  as  they  did  pay. 
Even  if  they  were  actually  worth  twelve  billions, 
they  still  paid  only  about  half  what  they  should. 

This  is  an  old  sore  spot  with  the  railroads. 
When  they  want  to  keep  rates  high,  they  insist 
that  the  roads  are  enormously  valuable;  when 
they  are  to  be  assessed  for  taxation,  the  roadbed 
is  worth  no  more  than  the  adjoining  real  property. 
So  the  same  man  going  from  the  Board  of  Equali- 
zation to  the  Railway  Commission,  has  naturally 
to  possess  an  elastic  conscience.  This  is  about 
on  a  par  with  everything  else  under  the  present 
system.  Well,  then,  how  should  taxation  work 
under  our  suggested  system? 

Any  theory  of  taxation  which  permits  any 
species  of  property  to  escape  its  equal  burden  of 
taxes,  or  which  twice  taxes  the  same  property, 
is  unjust.  The  transportation  system  as  here 
outlined  is  a  corporation.  The  physical  property 
of  a  corporation  is  represented  by  its  stock.  To 
tax  both  the  physical  property  and  the  stock  is 
to  twice  tax  the  same  thing.  Which,  then,  should 
be  taxed,  the  physical  property  or  the  shares? 
Obviously,  it  can  make  no  difference  to  the  state, 
because  under  the  proposed  scheme,  quite  unlike 
the  present,  the  railroads  and  their  stocks  are  of 
the  same  value,  and  as  dividends  are  to  be  paid 
on  the  stock,  the  state  could  collect  its  taxes  by 
requiring  the  corporation  to  deduct  them  from 
the   dividends  if  the   stock  was  taxed.      But  it 


Constitutional  Amendment  Sought  439 

would  make  a  good  deal  of  difference  to  the  trans- 
portation system  and  to  the  persons  who  paid 
the  tax.  If  the  physical  property  was  taxed, 
the  tax  would  come  out  of  the  pockets  of  those 
who  use  the  roads, — the  rates  would  have  to  be 
high  enough  to  cover  the  tax.  If  the  stock  was 
taxed,  the  tax  would  come  out  of  the  shareholders. 
It  looks  very  nice  to  take  it  out  of  the  shareholders. 
But  it  must  not  be  forgotten  that  the  stock  is  to 
pay  but  5%,  while  the  majority  of  the  existing 
bonds  draw  3^%,  4%  and  &%.  So  that  if  a 
tax  of  from  1%  to  \\%  was  to  be  levied  on  these 
securities,  it  would  reduce  their  income  below  the 
point  of  a  desirable  investment,  and  thus  the 
transportation  system  would  be  crippled,  and  no 
money  would  be  forthcoming  for  new  roads  or 
improvements  to  produce  safety  and  efficiency. 
Thus  a  false  step  in  this  direction  might  destroy 
the  advantages  of  the  whole  plan.  It  is  too  much 
like  the  scheme  to  borrow  money  and  not  pay  any 
interest,  beautiful  in  its  conception,  yet  apt  to 
result  in  the  loss  of  borrowing  power.  It  is  really 
surprising  how  many  statesmen  there  are  in  this 
country  of  about  that  caliber. 

Just  the  same,  there  are  a  good  many  honest- 
minded  people  in  this  land  who  think  that  it 
would  not  derogate  anything  from  the  rights, 
duties,  and  obligations  of  the  owners  of  the  twenty- 
five  or  thirty  billions  of  corporate  stocks  and  bonds, 
if  they  paid  something  from  their  incomes  for 


440  An  American  Transportation  System 

the  support  of  the  governments  which  protect 
them.  An  income  tax  in  this  country  is  unpopu- 
lar— so  are  most  taxes.  Perhaps  the  people  will, 
in  time,  come  to  the  conclusion  that  the  only 
way  to  compel  that  kind  of  property  to  pay  its 
just  share  of  the  burden  of  government,  is  an 
income  tax;  which, I  believe, will  be  found  in  most 
other  civilized  countries.  Meantime,  I  see  no 
escape  from  the  conclusion  that  if  we  are  to  have 
a  low  income  railway  security,  the  tax  will  have 
to  be,  as  at  present,  on  the  railways  and  not  on 
the  holders  of  their  securities.  I  say  this  not  out 
of  any  tender  regard  for  the  holders  of  such  securi- 
ties, but  because  I  believe  the  support  of  the 
transportation  system  is  of  more  importance  than 
any  theory  as  to  its  taxation. 

But  here  an  important  and  somewhat  perplexing 
question  presents  itself.  Of  course  the  tax  col- 
lected should  go  to  the  states.  It  could  be  paid  by 
the  corporation  into  the  federal  treasury,  and  be 
by  it  distributed  to  the  states  either  in  proportion 
to  the  value  of  railway  property  in  the  states 
respectively,  or  according  to  their  respective 
population,  as  would  be  found  most  equitable. 
There  would  be  found  no  difficulty  about  that. 
But  the  different  states  have  different  rates  of 
taxation.  Obviously  that  would  not  do.  Taxes 
may  be  raised  in  two  ways:  (i)  by  a  very  high 
rate  and  a  very  low  valuation  of  property;  (2) 
by  a  low  rate  and  a  high  valuation.     Where  certain 


Constitutional  Amendment  Sought  44 1 

states  knew  that  railway  property  would  be 
valued  at  its  full  value  for  purposes  of  taxation, 
there  might  be  an  inclination  to  make  the  rate 
high  and  the  valuation  on  all  other  property 
low,  in  order  to  get  an  unjust  share  of  the  taxes 
coming  from  railway  sources.  In  my  opinion, 
the  rate  of  taxation  on  railways  should  be,  like 
their  charges,  uniform  throughout  the  United 
States.  If,  for  instance,  a  uniform  tax  of  i% 
were  imposed  upon  the  capital  invested  in  all 
transportation  facilities,  payable  quarterly  by 
the  corporation  to  the  United  States  Treasurer, 
and  by  him  distributed  to  the  states,  either  in 
proportion  to  their  respective  populations,  or 
value  of  roads,  etc.,  it  would  not  only  afford  the 
most  equitable  form  of  taxation,  but  would  bring 
to  the  states  two  to  three  times  the  revenue  they 
now  derive  from  their  various  methods  of  railway 
taxation.  The  tax  would  not  only  be  certain, 
but  it  would  conform  to  the  fundamental  idea 
of  this  scheme, — that  transportation  is  a  matter 
which  equally  concerns  all  the  people  of  this 
land. 

XII.    Would  the  Proposed  Scheme  Central- 
ize Power  in  the  Federal  Government  ? 

Decentralization  of  irresponsible  federal  power 

That  which,  in  my  opinion,  is  the  least  of  all 
objections    to    this    scheme  of    transportation, 


442  An  American  Transportation  System 

is  the  one  most  nearly  insuperable.  It  would 
require  the  states  to  surrender  the  semblance  of 
authority  which  they  now  possess  over  such  rail- 
way operations  as  are  purely  intrastate.  It  is 
hardly  probable  that  if  every  intelligent  citizen 
in  every  state  were  convinced  that  this  scheme 
would  work  not  only  to  the  advantage  of  the  whole 
people,  but  to  the  advantage  of  every  state  as 
well,  concurrence  in  it  would  result.  So  great  is 
our  just  suspicion  of  the  centralization  of  power 
in  the  federal  government,  that  any  proposal 
looking  in  that  direction  is  instantly  condemned: 
no  other  reason  than  this  is  required  for  its  con- 
demnation. And  if  I  could  conceive  of  its  having 
the  effect  of  centralizing  additional  power  in 
the  federal  government,  I  should  be  the  first  to 
condemn  it ;  for  I  have  been  reared  in  the  strictest 
sect  of  believers  in  local  government,  and  wTith  a 
horror  of  irresponsible  power,  of  all  kinds,  which 
amounts  well-nigh  to  a  nightmare.  What  I  see 
most  plainly  is,  that  the  power  which  we  most 
fear  is  now  centralized  in  the  federal  government 
and  in  the  irresponsible  branch  of  it,  and  that 
the  remnant  of  authority  left  in  the  states  is  but 
an  irritating  phantasmagoria.  It  is  not  to  central- 
ize further  power  in  the  federal  government,  it  is 
to  make  the  federal  authority  responsible  for  a 
power  already  centralized  in  it,  that  this  plan  of 
constitutional  government  of  transportation  is 
proposed. 


Constitutional  Amendment  Sought  443 

It  is  unnecessary  to  recount  the  reasons,  already 
fully  given,  why  the  authority  of  the  states  over 
their  domestic  corporations  has  disappeared  and 
why  the  authority  once  held  has  been  centralized 
in  the  federal  government.  It  is  sufficient  to  say 
that  the  constitutional  authority  of  congress  to 
regulate  commerce  among  the  states  has  con- 
stantly expanded  under  judicial  interpretation, 
until  now  every  road  in  any  state  has  practically 
become  an  interstate  facility  of  transportation. 
Even  where  freight  originating  within  a  state  is 
to  be  shipped  to  a  destination  within  the  state, 
yet  if  during  its  journey  it  passes  by  ever  so  small 
a  distance  out  of  the  state,  it  becomes  interstate 
and  not  intrastate  traffic.  Even  if  a  road  begins 
and  ends  in  a  state,  yet  if  it  permits  itself  to  carry 
freight  originating  outside  of  the  state,  it  is  an 
interstate  facility  of  transportation.  This  judicial 
extension  of  the  power  to  regulate  commerce, 
coupled  with  the  Fourteenth  Amendment,  giving 
the  federal  courts  authority  to  negative  any  state 
legislation  on  the  subject  of  the  taxation  of  rail- 
ways or  the  regulation  of  their  rates,  completed 
the  obliteration  of  state  sovereignty  over  railway 
corporations.  The  states  are  left  in  the  undigni- 
fied attitude  of  making  laws  which  may  be  de- 
feated, or  vetoed,  by  their  governors-general, 
the  federal  judges,  not,  indeed,  by  virtue  of  any 
constitutional  provision  which  any  one  ever 
supposed  would  confer  such  powers  on  the  federal 


444  An  American  Transportation  System 

courts,  but  purely  by  virtue  of  their  assumption 
of  it  as  the  final  interpreters  of  their  own  jurisdic- 
tion. This  as  we  have  seen  creates  a  legislative 
vacuum.  Its  effect  is  to  deny  legislative  power 
to  the  state  without  conferring  it  upon  any  other 
legislative  authority. 

We  must  be  rid  of  this  situation  by  some  means. 
It  is  absolutely  necessary  to  amend  the  constitu- 
tion so  that  this  uncontrolled,  irresponsible, 
centralized  judicial  power  be  brought  under  con- 
trol by  exactly  defining  the  jurisdiction  and 
power  of  the  court  which  deals  with  the  subject. 
It  is  the  consummation  of  governmental  absurdity 
for  us  to  drift  on  forever,  leaving  it  to  the  courts 
and  judges  to  say  what  return  upon  the  invested 
capital  of  corporations  engaged  in  transportation 
is  reasonable.  That  is  a  legislative  not  a  judicial 
function.  Let  us  therefore  do  one  of  two  things, 
either  confess  our  incompetency  to  legislate  upon 
our  vitally  important  affairs  or  call  in  a  king, 
who  shall  have  combined  in  himself  legislative, 
executive,  and  judicial  powers.  We  are  not  quite 
ready  for  that  august  individual  yet,  but  we 
have  set  up  one  closely  resembling  him  in  the 
person  of  a  federal  judge. 

This  amendment  adds  no  power  to  the  central 
government;  it  makes  the  central  government 
responsible  for  a  power  it  has  assumed.  If  the 
federal  judge  now  has  power  to  say  to  the  states : 
"You  cannot  make  rates  unless  they  appear  to 


Constitutional  Amendment  Sought  445 

us  to  be  reasonable, "  then  we  say:  "  We  will  give 
you  power  to  make  rates,  but  you  will  make  them 
according  to  the  fundamental  law  as  we,  the 
public,  shall  declare  it.  We  will  declare  what 
income  is  reasonable  for  capital  invested  in  trans- 
portation, how  rates  should  be  apportioned  among 
commodities,  how  capital  stock  may  be  issued, 
how  the  corporation  shall  be  carried  on,  and  it  will 
be  your  duty  to  see  that  the  corporation  obeys 
the  law." 

This  does  not  centralize  power;  it  limits,  re- 
stricts, and  defines  a  power  already  centralized. 
In  taking  this  step  the  states  surrender  nothing 
except  their  capacity  to  be  irritated  by  unfruitful 
legislation. 

Governmental  vs.  corporate  centralization 

There  is  another  aspect  of  the  dread  of  the 
centralization  of  power  which  must  not  be  over- 
looked. Many  there  are  to  whom  the  increase 
of  federal  authority  is  a  nightmare,  yet  who  can 
view  with  complacency  the  centralization  of  non- 
governmental power.  The  one  fact  which  admits 
of  no  possible  doubt  is,  that  this  country  is  in 
process  of  acquiring  the  most  gigantic  corporation 
ever  conceived  by  the  mind  of  man.  The  question 
is  not  whether  the  integration  of  railway  interests 
will  continue.  This  is  assured.  It  is  a  necessity, 
and  necessity  knows  no  law.     The  questions  are: 


446  An  American  Transportation  System 

How  should  the  inevitable  integration  of  railways 
be  brought  about — whether  by  the  uncontrolled 
processes  now  at  work,  or  by  processes  under  con- 
trol; and  when  the  end  is  reached,  whether  we 
will  have  a  giant  which  the  people  shall  serve,  or  a 
giant  serving  the  people?  It  may  be  either,  just 
as  the  people  will  it. 

Can  it  be  doubted  that  this  process  of  amal- 
gamation is  at  work?  Look  at  it  broadly.  Do 
you  not  see  it  at  work  in  every  department  of 
human  activity?  Not  only  have  workmen  in 
their  several  trades  combined,  but  they  have 
combined  and  recombined  into  a  national  organiza- 
tion. Capital  has  done  or  is  doing  the  same  in 
all  directions.  Are  not  all  these  corporations, 
mergers,  and  unions  suggestive  of  the  operation 
of  some  great  social  law,  under  the  influence  of 
which  the  world  of  business  seems  recently  to 
have  fallen  ?  The  constant  tendency  of  increasing 
intelligence  is  in  the  direction  of  unification.  The 
whole  world  is  a  thousand  times  closer  together 
to-day  than  it  was  a  hundred  years  ago.  There 
is  scarcely  any  such  thing  left  as  isolation.  It 
would  take  us  far  afield  to  state  all  the  reasons 
why  this  is  so.  The  whole  subject  maybe  summed 
up  in  two  interchangeable  words :  intelligence — 
organization. 

As  applied  to  railway  corporations  this  law  has 
operated  somewhat  as  follows :  like  railway  units 
— that  is  the  formerly  small  independent  lines, — 


Constitutional  Amendment  Sought  447 

similarly  situated  and  subject  to  the  same  forces, 
first  combined.  The  combinations  thus  formed 
were  brought  within  the  range  of  each  other 
and  underwent  like  combinations.  This  process 
carried  to  its  logical  conclusion  means  the  amalga- 
mation of  all  railway  corporations  into  one  trans- 
portation system.  Only  thus  can  full  efficiency  be 
attained. 

There  is  no  more  use  to  try  to  stop  the  operation 
of  a  natural  social  law,  than  there  is  to  legislate 
against  the  law  of  gravity.  A  thousand  pages 
would  not  be  sufficient  to  give  a  complete  history 
of  the  railway  mergers,  leases,  absorptions,  and 
consolidations  which  have  taken  place.  After 
that  there  would  still  have  to  be  written  the  inside 
history,  the  doings  to  get  around  the  laws  which 
have  been  pestiferous  and  have  driven  men  to 
underground  methods,  but  have  not  stopped  the 
operation  of  the  natural  law.  And,  indeed,  how 
could  it  be  expected  that  it  would  be  stopped  ? 
Laws  may  be  passed  declaring  it  unlawful  for 
parallel  or  competing  corporations  to  own  stock 
in  each  other.  What  of  it?  Is  it  necessary  to 
the  accomplishment  of  the  result  that  the  corpora- 
tions should  own  each  other's  stock?  It  is  quite 
sufficient  that  the  same  individuals  own  the  stock. 
Should  it  be  the  law  that  the  same  individuals 
may  not  own  shares  in  parallel  lines,  or,  if  you 
please,  in  any  two  or  more  lines?  Well,  when 
the  time  comes  in  the  United  States  that  one  may 


448  An  American  Transportation  System 

not  sell  what  he  owns  and  another  may  not  buy 
what  is  for  sale,  the  occasion  will  be  ripe  to  throw 
the  constitution  into  the  ditch.  But  even  such 
a  law  would  be  an  open  bid  for  its  evasion. 

Since,  then,  the  process  of  railway  amalgamation 
is  a  natural  one;  since  it  is  interpretable  in  the 
terms  of  high  intelligence  and  organization;  why 
not  permit  it  to  work  out  its  result  of  unifying 
all  transportation  facilities?  Why  impede  it? 
Why  this  book? 

I  should  be  unqualifiedly  in  favor  of  facilitating 
and  accelerating  the  natural  process  and  leaving 
the  accomplished  organization  under  the  manage- 
ment of  men,  free  from  a  taint  of  governmental 
influence,  were  it  not  for  one  fact,  that  human 
nature  invested  with  such  tremendous  power 
becomes — hoggish.  Or  to  put  it  in  the  polite 
words  of  Judge  Dillon  :  "  Uncontrolled  power  in 
a  few  men  by  any  form  of  corporate  device  to 
control  the  railway  systems  of  a  great  country 
is  a  power  too  great  to  be  compatible  with  the 
public  weal,  and  one  which  would  not  be  perma- 
nently endured  by  the  people." 

We  need  not  stop  now  to  specify  the  hundreds 
of  ways  in  which  such  vast  power  could  be  used 
to  the  aggrandizement  of  its  managers  or  the 
detriment  of  the  people.  It  is  sufficient  to  say 
that  when  our  transportation  system  is  complete, 
it  will  employ  a  capital  of  not  less  than  forty  to 
fifty  billions  of  dollars,  and  not  less  than  five 


Constitutional  Amendment  Sought  449 

millions  of  employees,  and  that  those  who  manage 
it  without  control  possess  the  power  to  overthrow 
the  equilibrium  of  our  institutions.  Just  to 
mention  one  aspect  of  the  case:  there  is  more 
than  one  state  to-day  in  which  the  railway  cor- 
porations control  the  balance  of  political  power, 
and  when  their  consolidation  is  complete,  it  is 
not  unlikely  that  with  their  vast  wealth  used  to 
buy  up  salable  votes  and  their  coercive  power 
over  their  own  employees,  they  could  control 
the  balance  in  national  politics.  So  the  question 
simply  is  whether  we  will  let  our  fear  of  centralized 
national  power  so  prey  upon  us  that,  while  we 
sleep,  we  will  become  the  victims  of  another 
centralized  power  infinitely  more  dangerous.  If 
in  answer  to  this  it  be  said  that  the  states  by 
holding  to  their  control  over  their  domestic  roads 
may  prevent  this  result,  the  answer  is,  that  above 
all  they  are  impotent  to  do  so.  Even  if  they 
could  prevent  the  sale  of  the  mere  physical  assets 
of  the  roads  within  their  borders — a  very  doubtful 
power, — they  could  have  no  authority  over  the 
sale  of  the  stocks  of  the  corporations,  which,  for 
the  most  part,  are  held  by  people  who  are  not 
even  their  citizens. 

And  now  note  that  the  control  of  the  process 
of  railway  consolidation  is  only  second  in  import- 
ance to  the  control  of  the  consolidated  corporation 
which  will  result.  The  chief  iniquity  of  the  pro- 
cess of  railway  absorptions,  mergers,  and  consoli- 


45°  An  American  Transportation  System 

dations  as  carried  on  at  present,  consists  in  the 
fact  that  the  process  is  always  at  the  expense  of 
the  public.  One  of  these  operations  which  was 
accomplished  without  the  issuance  of  quantities 
of  fictitious  stock  would  be  considered  unprofitable 
railroad  financiering.  This  should  be  stopped  at 
once.  But  how  ?  If  there  is  any  power  in  either 
the  state  or  nation  to  grapple  with  this  problem 
in  its  entirety,  it  certainly  has  never  been  exer- 
cised. It  simply  does  not  exist  and  never  will 
until  the  whole  matter  is  turned  over  to  the  central 
power  by  a  constitutional  amendment  which  at 
once  defines  the  mode  of  consolidation,  and  the 
powers,  duties,  and  responsibilities  of  the  trans- 
portation system  when  completed.  If  to  do  this 
be  to  centralize  power,  then  choose  between  that 
and  centralized,  uncontrolled  corporate  power. 


INDEX 


Accidents,  apology  for  railway 

at  highway  crossings 

at  stations   .... 

breaking  down  of  equipment 

causes  of,  from  railway  standpoint 

collisions      .... 

cost  of,  to  railways 

coupling  or  uncoupling  cars    . 

defective  or  worn  out  appliances 

derailments  .... 

falling  from  cars,  etc.,  employees 
"         "        "      "      passengers 

jumping  on  or  off  trains,  etc. 

kinds  of  railway    . 

law  of  railway,  principles  of   . 

laws  to  prevent     . 

meaning  of  "killed"  and  "injured"  in  railway 

natural  law  of 

negligence  of  employees 

overhead  obstructions   . 

parting  of  trains   . 

persons  killed  and  injured  in,    29,  159,  161,  165, 

prevention  of,  by  mechanical  appliances  . 

primary  cause  of  . 

sources  of  information  concerning  . 
Accounts,  cost  op  road       ...  57,  68, 

Aquisition  of  railway  system,  cost  op 

waste  in        ...  .  . 

Adequacy  of  transportation  defined  {See  Inade- 
quacy)     .      .  ..... 

45i 


PAGB 

9 

I88-I90 

I9I-I94 

207 

i 68-1 7 i 

194-204 

28 

172-175 

175.  l8a 
204-207 

I75-I8S 

185-188 

209-211 

158-161 

I54-I58 

155. 168 

164 

164-168 

211-215 

208 

207 

173, 178 

212-214 

215 

162-164 

128, 322 

48 

51 

19 


45  2 


Index 


Air-brakes,  as  preventive  op  accidents  to  em- 
ployees .......   176-183 

defects  in  law  requiring  use  of         .  .  .177-181 

inadequacy  of,  as  preventive  of  certain  accidents         182 
increase  in  use  of,  1 893-1 906  .  .  .  .  178 

American  and  European  railway  safety  .        11,  13,  196 
American  governmental  scheme's  weak  spot     .  280 

American  railway  financial  scheme.  .  .   248-254 

Appraisement  of  railways  .         .  .  .  316 

apparent  difficulty  of     .  .  .  .  .  320 

evidences  of  value  .         .  .  .  -321-333 

how  made    .  .  .  .  .  .  .  316 

rate- making  without,  only  guesswork       .  .    125-128 

who  should  make  .  .  .  .  .  316 

Arbitration,  court  of        ....  .  433 

Assets  and  liabilities  of  railways    ...  48 

Atlantic    Coast     Line,    example    of    holding 

company  .......  138 

Authorities  on  railway  facts,  variation  in       .  139 

Automatic  couplers  .  .  .  .  .  172 

decrease  in  accidents  from  use  of  .  .1 73-1 74 

use  of  defective  and  worn  out  .  .  .  175 

Automatic  organisms  .....  233 

safety  vs.  care       .....     170,196,212 

transportation  system    .  .  .  .  .  435 

Average  of  charges  in  rate-making  .  .  120 

per  cent,  of  dividends    .  .         .  .  .  126 

rates,  1896-1906  ......  396 

Balance  sheet,  railway,  1907    ....  48 

Bankruptcy  and  business  methods    ...  34 

and  railway  debts           .          .          .          .          .  49 

of  railways             .          .          .          .          .         .  126 

Block  signal  system          .....  196-197 

accidents  notwithstanding  use  of     .          .          .  197 

suggestion  of  signal  observer  in  train  crew        .  199-202 

Bonds,  railway  ownership  of    ...  42 

varieties  of  ......  06 

weakness  of  financing  by                   .          .          .  251 


Index 


453 


Capital,  railway,  controlled  by  few  men 

fair  return  on        .  . 

fixed  return  on,  invested  in  transportation 

honest  amount  unknown 

increase  of,  and  railway  facilities  compared 

increase  of,  summary  of  calculations 

invested  in  railways,  June  30,  1906 

ownership  and  control  .... 

ownership  necessary  to  control 

percentage  receiving  no  returns 

who  furnished  it   . 
Capitalization  and  cost  op  roads  account 

dishonest  and  economic  waste 
Capitalizing  growth  of  country 
Caveat    emptor,   inapplicable   to    complicated 

securities        .... 
Centralization  of  corporate  power 

of  federal  power  .... 
Charges,  impressiveness  of  railway  . 
Classification  of  railway  accidents 

of  traffic  ..... 
Collisions,  accidents  caused  by 

are  avoidable         .... 

destruction  of  railroad  property  from 

Great  Britain  and  America  compared 

kind  of,  and  their  causes 

means  employed  to  prevent 
Commerce,  power  to  regulate 

controlled  by  railways   . 
Competition,  and  bankruptcy 

and  economy 

and  indirect  freight  carriage 

and  locality  discriminations 

and  monopoly 

and  publicity        . 

and  reasonable  rates 

and  rebates 

excuse  for  all  railway  wrongs   .  .         34,233, 

inter-railway,  justification  for  bad  practices 


PAGB 

141 
124,372 
372-380 

124 

52-93 

66 

140 

4I.3S8 

135-139 

127 

40 

128 

39-52 

87,366 

377 
445 
441 
225 
158-161 
422-430 
194 

3°,  195 

28-29 

196 

195 

196 

296 

407-410 

34-37 
242 

32-37 

239 

34,  244 

359 

241 

237 
248-250 
116,  411 


454 


Index 


Competition     (Continued)  page 

legislature  concerning  inter-railway  .  .  233 

of  rail  and  water  transportation      .  .     114,347,351 

railway,  defined,  .  .  .  .  .  .  235 

reliance  of  public  on,  to  correct  railway  abuses  34,  23  5,  248 
Complaints  against  railways     .  .  .  8,  236 

Complexity  of  rates,  causes  of  .         .         .  123 

Conflict  of  laws       ......  282 

effect  on  railway  corporations  .  .  .  284 

Conflicting  regulations  .....  294 

Congress,  dormant  powers  of    .  .         .         .  305 

characteristic  powers  of  .  .  .  297 

power  to  charter  corporations      .  .  .  343 

to  compel  railway  adequacy         .  .         .  220 

to  control  corporate  financing      .  .  .  301 

to  make  rates  not  conclusive       .  .         .  228 

to  regulate  commerce  .  .  .  .  296 

Consolidation,  railway,  interpretation  of        .  303,  446 

Constitution,  federal,  aspects  of  .  .   270-274 

self  executing  provisions         .  .         .  .  305 

Constitutional  amendment  suggested        .         .  270-316 
conflict  of  laws  affecting  railways    .  .  .282-285 

corporate  finances  controlled  by  no  law  .  .   285-292 

distribution,  control  of,  a  federal  function         .  297 

financial  and  physical  acts  in  different  states    .   292-293 
14th  amendment  destroyed  constitutional  equi- 
librium    .......    276-279 

legislative  vacuum  .  .  .  .  .  280 

Consumers,  rights  of,  ignored  .         .         .         .  418 

Contributing  business  to  support  railway         .  404 

Control  of  corporations  and  stock  ownership 

41,  79.  i34,  139.  357 
by  small  minority  of  capital   .  .  .  .134-139 

how  perpetuated   ......    134-139 

Co-ordinate  railway  action       ....  233 

Corporate  acts  and  physical  property       .         .  284 

Corporations,  charters  by  congress  .         .  343 

charters  by  states  .  .  .  .  .  284 

in  practice    .......  132 

in  theory      .......  131 


Index 


455 


Corporations     (Continued) 

mutual  character  of 

ownership  of  stock  in  each  other 

popular  misconceptions  concerning 

under  proposed  scheme .... 

without  control     ..... 
Corruption  op  politics  by  railways  . 
Cost  and  capitalization  compared 

and  safety    ...... 

of  operation  under  one  management 

of  our  railways      ..... 

of  railways  to  the  nation 

of  railways  and  railway  debt 

of  required  improvements  and  developments 

of  road  account    ..... 

of  service  in  rate-making        .  26,123-124 

Coupling  and  uncoupling  accidents 

automatic  couplers,  invention  of 

legislation  requiring  use  of 

link  and  pin  coupling,  dangers  of 

table  of  accidents  since  use  of  automatic  coup 
lers  ...... 

Court  and  transportation  system 

jurisdiction  of,  proposed 
Current  obligations  of  railways 

Damages  paid  by  railways 

are  losses  paid  by  the  public 

the  laws  remedy  for  wrongs   . 
Derailment  accidents        .... 

and  natural  law  of  railway  accidents 

correspondence  between  equipment,  roadbeds 

increase  in,  since  1900   . 

number  of,  each  year    . 
Directors  are  trustees     . 

duties  of 

under  proposed  scheme . 
Discriminations  against  localities 

are  national  disintegrating  factors 

are  rebates  to  favored  localities 


PAGB 

358 

46,  77.  134-139 

39 

340-357 

284-289 

146 

2-84,  129 

171 

313 

128-131 

26 

52-93 

255 

57.322 

, 404, 424 

172-175 

173 

173 

172 

174 

43 « 

423 

61 

28 

28,  157 

154 

204-207 

204 

etc.     205 

204 

204 

131 
361 

357 

,351.411 

412 

416 


456 


Index 


Discriminations     (Continued) 

caused  by  competition  . 

justification  for     ..... 
Dishonest  securities,  economic  waste  from 
Distance-charges,  in  rate-making 

relative         ...... 

Distribution  op  wealth     .... 

essentially  a  federal  function . 
Diversity  of  railway  securities 
Dividends,  delusiveness  of  average 
Draw  bars,  uniformizing  .... 
Dummy  companies,  financing,     . 
Duplication  of  railways,  financial  waste  in 


PAGB 

2.39 
414 
93-106 
400 
407 
108 
297 

96 

126 

172 

88-93 

34 


Economic  Waste  (See  Economy,  Waste) 
Economy,  railway  defined, 

financial  aspect  of  .... 

misleading  conceptions  of 

narrow  view  of  .  .  ... 

of  proposed  scheme        .... 

scope  of        .....  . 

various  aspects  of. 
Employees,  court  of  arbitration 

errors  and  mistakes  of   . 

negligence  of,  as  cause  of  accidents 

obedience  and  discipline  of     . 

railway,  represent  twelfth  of  population  . 

right  of  to  strike   .      .  ... 

Employer  and  Employee,  reciprocal  duties  of 
Equalized  vs.  uniform  rates 
Equipment  and    roadbed,    correspondence    be 
tween     ...... 

inadequacy  of 

increase  in  weight  and  capacity  of  . 

requisites  of  ..... 

Errors  of  employees         .... 
Evolution,  natural  railway 
Expedition,  lack  of,  in  freight  movement 
Expenses,  operating  and  capital 


24 

39 

22 

26 

312 

"3 

24 

433 

198 

211 

12, 214 

433 

433 

433 

418 

204-205 

i45 
20 
20 

198 

3°3 

16 

386 


Index 


457 


Facilities,  railway,  measure  op 

defined         ..... 

increase  of,  and  of  railway  debt 
Fair  return  on  railway  investment. 
Falling  from  cars,  etc.,  accidents 
Financial  scheme  op  American  railways 
Financing  dummy  companies 
Fixed  charges,  railway     . 

return  on  railway  capital 
Fluctuations  in  railway  securities 
Fourteenth  amendment,  provisions  of 

destroyed  constitutional  equilibrium 

exaltation  of  federal  judiciary 

is  a  mere  negation 
Franchise  value  of  railways    . 
Free  trade  in  United  States     . 

an  integrating  force 
Freight    business,  classes  of,  relative 

penses         ..... 

carriage,  limitations  of  . 

classification  of 

excessive  carriage  of 

excuses  for  indirect  carriage  of 

indirect  carriage  of 

movement,  slowness  of 

what  pays  to  handle 


2,  274 

TO    EX 


PAGB 
54 
56 

52-93 
124, 372 
175-188 
248-259 

88-93 

122, 386 

372-380 

106-113 

277 

276 

278 

279 

326 

296,  410 

413 

403 
402,  405 

422 

421 
33 
3i 
16 

123 


Gambling,  stock,  forced  on  people    . 

caused  by  multiformity  of  securities 
Getting  business,  railway  principle  of, 
Government  and  transportation 

duty  re  honesty  or  securities 

ownership  of  railways    . 

vs.  corporate  centralization 

weak  spot  in  American 
Great  organizers 

railway  men 
Growth  of  railway  system 


83 


94 

103 

102,  400,  425 

I24,  372.  431 

376 

7,341,368 

445 
280 

143 
376 
114 


45» 


Index 


Highway  crossing  accidents 
Holding  companies    . 


PAGE 

188 
J^-^,  286-289 


Illegal  gain  op  railway  managers    . 
Impartiality  in  railway  service 
Improvements  required  in  railways 

made  out  of  income       .... 
Inadequacy,  railway,  percentage  of 

of  equipment         . 

of  system     ...... 

waste  from  ...... 

Income  of  ideal  road         .... 

on  railway  investment  .  .  .126 

Increased  cost  of  railways,  1900-1906 

cause  of        .....  . 

Indebtedness,  railway,  as  measure  of  cost 

of  railways  a  perpetual  debt  . 
Indirect  freight  carriage,  waste  from 

excuse  for,  inter-railway  competition 

saved  by  co-ordination  of  railways 
Individual  incentive  under  proposed  plan 
Individualism    ...... 

Initial  charges  ..... 

Inland  water  transportation,  destruction  of  3  7 
Instability  of  railway  securities  .  106-113, 
Interstate  and  intrastate  transportation  293, 
Inventions,  managers  slow  to  adopt  .  .     157, 

Investment  in  railways,  the  honest  unknown 
Investments,  lack  of  good         .... 


131-145 

"4,  346 

19,  256 

39i 

223 

14 

1S.219 

3° 

122 

•128,  372 

52-72 

73-79 

56 

80 

31 

33 

33 

364 

149 

401 

'.  "5.  34 

376,379 

343,  443 

172,  185 

124 

376 


"Killed"  in    railway    accidents,    meaning  of 


164 


Law,  natural,  of  railway  accidents 

applied  to  coupling  accidents 
"       "     derailment    " 
Legislation  concerning  railway  adequacy 

concerning  discrimination 

concerning  railway  competition 

concerning  railway  rates 


164 
174 
204 
218 
413 
233 
225 


Index 


459 


Legislation     (Continued)  **o» 

concerning  railway  safety       .  .  .  .  154 

by  states  concerning  railways  .  .  .  291 

destructive  and  constructive  .  .  .  .  151 

remedial  and  preventive         .  .  .     154-157,  170 

Legislative  vacuum  ......  280,  293 

Long  and  short  haul         .....  401,  409 

apology  for .  .  .  .         .         .  .  406 

Maintenance  a  fixed  charge     ....  122 

Manipulation  op  railway  securities  .  .   108,  379 

Market  value  of  railway  securities  .  .  330 

Marshaling  railway  assets        ....  333 

Measure  of  railway  facilities  ...  54 

Mileage,  cost  of,  before  and  after  1906  .  .       52-72 

daily  average  of  freight  cars  .  .  .  .  16 

railway  in  United  States  1906  .         .  .  139 

Monopoly  and  business  methods        .         .         .  355 

and  competition    .....         3 4~3  7,  243 

control  of     ......  356 

of  water  transportation .  .  .         .  .  353 

railway  essentially  a      ....  .   244,  349 

wrong  in 356 

Mutualism  and  socialism  ....  423 


Nation  and  railway,  relation  between 

National    indebtedness    inherent    in  railwa 
debt         ...... 

Necessities  and  luxuries  and  railway  rates 

Negligence,  a  human  attribute 
punishment  for,  as  a  preventive 
rules  and  regulations  do  not  avert 

New  Haven  case,  conflict  of  laws 

New  York  Stock  Exchange,  sales  in 
and  value  of  railway  securities 

Northern  Securities  Case 

Over-capitalization,  allegations  concerning 
Ownership    of    railways,    popular    misconcep 
tion  of     . 


124, 372 

So 

427 

198, 199 

21S 
169 
282 

44,95 

330,378 
288 

3,5i 
40 


460  Index 


PAGE 

Ownership  and  right  to  sell     ....  290 

Overhead  obstructions,  accidents  from    .         .  208 

Panic,  losses  in  .  .  .  .  .  .  no 

Panics,  causes  op  .         .         .         .         .  in 

Parting  of  trains,  accidents      ....  207 

Pennsylvania  Railroad,  stockholders  in  .  .  45 

Percentage  of  income  on  railway  capital  .  372 

principles  governing        .  .  .  .  .  383 

Platform  for  getting  on  and  off  cars        .  .  186 

Politics  and  the  railways  .         .         .     145-147,  344 

Post-roads,  under  national  control  .  .  299 

Principles  of  rate-making  .         .       118,123,232,399 

governing  relations  between  public  and  railways    124,  372 
of  railway  accident  law  .  .  .  .  .  154 

Production  and  transportation  .  .  .375.417 

Promoters'  profits    .  .  .  .  .  .  51 

Publicity  of  corporate  acts      ....  359-360 

Railway  a  national  necessity   .         .         .         .  1, 49 

adequacy  (See  Adequacy,  Inadequacy) 

economy,  scope  of           .          .          .          .          .  113 

evolution  of  .....     246,  303,  449 

debt,  a  national  charge           ....  50,  74 

facilities  and  railway  debt,  growth  compared    .  52-93 

financial  scheme    .          .          .          .          .          .  248 

income  of  ideal      ......  122 

indebtedness    (See    Bonds,   Capital,  Cost,   In- 
debtedness, Stocks) 

losses  fall  on  the  people          .          .          .          .  29 

safety  (See  Accidents,  Safety) 

system,  how  acquired    .....  48 

transactions,  immunity  of                 .          .          .  139 

valuation  of           ......  316-333 

waste  (See  Economy,  Waste) 

working  to  full  capacity          .          .          .          .  121 

Rates,  absence  of  principle  in  making       .  .118,  227 

average,  1896-1906         .....  395-396 


Index 


461 


Rates     (Continued) 

complexity,  cause  of 

and  distances 
Rate-making,  annual  stab 

cost  of  service  in  .  .  .  26,  123-124 

divisions  of  . 

no  conclusive  authority 

principle  involved  in 

process  of     . 

public  policy  in     . 

value  of  freight  in 
Reasonable  rates,  a  judicial  question 

and  sufficient  rates 

no  data  for  ascertainment  of 

no  such  thing  as  inherent 
Rebates,  origin  op    . 

to  localities  .... 

Redeemability  of  securities 
Relative  rates  .... 

Reports  of  corporations  to  courts  . 
Revenue,  railway,  legitimate  sources  of 

must  be  sufficient  for  support 

rates  and  classification  of  services  . 

under  proposed  plan 
Right  to  sell  what  is  owned 
Rock  Island  Company,  example  of  holding  com- 
pany        ....... 

Roundabout  haul  (  See  Indirect  freight  carriage) 


PAGE 
121, 123 

399 
229 

404, 434 
397 
228 

232 

33i. 399 

119 

228 

230 

27 

124, 230 

117, 238 

407, 416 

81,389 
407 
360 
125 

231 

230 

39i 
290 

137 


Safety  appliances  vs.  care 

Safety  and  cost         .... 

degree  afforded  by  railways,  only   10%  of  ab- 
solute       ....... 

degree  demanded  of  railways,  the  highest   ob- 
tainable   ....... 

European  and  American  compared 
waste  from  lack  of         .... 

Savings  under  proposed  scheme 
Securities,  railway,  duty  of  government  con- 
cerning ....... 


170,  197, 212 
10,  171 


13 

10 

11 

28 

312 


376 


462 


Index 


Securities     (Continued)  page 

made  by  resolution  and  printer's  ink        .          .  84 

fluctuations  in  value      .....  106-113 

instability  of          .          .          .          .          .          .  93,  106 

multiplied  diversity  of             ....  96,  377 

owned  by  railways  in  each  other       .  46,  77,  134-139 

redistribution  of,  under  proposed  plan      .          .  334 

under  proposed  scheme,  stability  of         312,  314,  384-387 

wide  variations  in  value  of  same  company        .  98 

Services  contributing  to  railway  support         .  123 

Shipper,  value  of  service  to               .          .          .  119 

Signal  observer  in  train  crew           .          .          .  200 

Signals,  failure  of  trainmen  to  observe            .  197 

excuse  for,  multiplicity  of  duties     .          .          .  198-199 

Sobriety  of  American  trainmen         .          .          .  199 

Southern  Pacific's  stock  dividend     .          .          .  84-88 

Stability  of  investments  (and  see  Securities)        .  160 

Standardization  of  equipment            .         .         .  208 

States'  power  over  domestic  affairs          .         .  275,  291 

power  to  make  rates      .....  228,279 

power  suspended  by  14th  Amendment     .     279,  291,  443 

power  over  railways,  surrender  of   .          .          .  441 

same  railway  in  several           .          .          .          .  284 

Stations,  accidents  at       ....  191 

Statistics  of  railways       .....  322 

Stock,  railway,  amount  of        ...  45 

bonuses        .......  251 

dividends     .......  84 

kinds  of        ......  96 

outstanding  1906            .          .         .          .          .  136 

ownership  and  management  ....  41-47 

"  "    control  .  .  .  .  .46,  134 

ownership  by  railway  corporations           .          .  46,  79 

voting  privileges  of                  .          .         .          .  134 

watering,  examples  of    .          .          .          .          .  88-93 

Stockholders,  number  in  railways    ...  45 

Strike,  disaster  in  railway       ....  433 

Summary  of  thought  re  transportation     .          .  1-8 

Supply  and  demand  and  railway  rates       .          .  373 


Index 


463 


Supreme  Court  as  railway  appraisers 
Surplus,  railway  and  accident  loss 

Table  op  capital  receiving  no  return 

coupling  and  uncoupling  accidents 

falling  from  car  accidents 

railway  accidents,  1888-1906. 
Taxation  of  transportation  facilities 
Terminal  charges      .... 

facilities,  cost  of   . 
Terminals,  railroad  no  better  than  its 
Trackage,  increased  required  . 
Traffic,  classification  of 
Trainmen,     percentage     killed     and     injured 

YEARLY       ..... 

Transportation,  a  charge  on  the  country 

as  a  financial  operation 

as  a  physical  operation 

and  production      .... 

distinguished  from  other  industries 

importance  of        ... 

matured  ideas  concerning  unrealized 

summary  of  ideas  concerning 

unified,  economy  of 
Trespassers  on  railways  .  .  .         .13 

Trustees,  railway  directors  are 


Unification  of  transportation 
Uniform  rates  defined 

how  they  would  work    . 
Uniform  vs.  equalized  rates 
Uniformity  of  securities  . 
Unit  of  carrying  capacity 


Vacuum,  legislative  in  America 
Valuation  of  railways  (See  Appraisement) 

by  each  other       .... 
Value  of  freight  in  rate-making 


PAGB 

318 

30 

127 

174 

178 
165 

437 

401 

20 

21 

20 

422 

11-12 
21 

25,  108 

25,  108 

375,417 

341,  375 

1 

4 
1-8 

33,3™ 
160,  163 

131 

347 
415 
4i7 
418 

333 

55 

280 
316 
321 
120 


464  Index 


Values    op  different    classes    of    securities, 

variation  in     .....         .  99-103 

Wages,  aggregate  of  railway  ....  43 

Waste,  railway,  from  dishonest  capitalization  39 

from  dishonest  securities         .          .          .          .  93 

from  duplication  of  railways  .          .          .          .  34 

from  excessive  freight  carriage         .          .          .  421 

from  inadequacy  .          .          .          .          .          .  30 

from  indirect  freight  carriage .          .          .          .  31 

from  killing  water  carriage     .          .          .          .  37 

from  lack  of  expedition .....  16 

from  lack  of  safety         .          .          .          .          .  28 

in  acquisition  of  system           .          .          .          .  51 

ultimately  falls  on  the  public  .  .    28,74,85-157 

Water  transportation,  a  national  asset  .          .  37 

a  monopoly  now   .          .          .          .          .          .  353 

carriage  by            .          .          .          .          .          .  351 

competition,  excuse  for  wrongs        .  .     350,411,419 

waste  from  destruction  of,  by  railways    .          .  38 

Wealth  in  railways           .          .          .          .          .  312 

Western  Pacific  Railway,  cost  of     .          .          .  88-93 

"What  the  traffic  will  bear"  defined     .          .  118 

Wrongs,  railway,  competition  excuse  for          »  350 


WIOU      ^ 


filLA 


s*Ms 


